October 19, 2011 / 1:05 AM / 8 years ago

Pershing Square bets on Fortune Brands Home & Security

NEW YORK (Reuters) - Hedge fund manager William Ackman’s Pershing Square Capital Management is betting on Fortune Brands Home & Security (FBHS.N) as he expects the housing market to rebound.

The company, which makes faucets, locks, windows and doors and cabinets, was spun out of Fortune Brands in recent weeks. Now Pershing Square considers the stock to be “very cheap.”

Ackman and his analysts forecast strong growth for the company, especially if the housing market picks up again.

“In order for this to be a good investment, it assumes a partial recovery in the housing market in the next five years,” Ackman said at the Value Investing Congress. “I think that’s a very conservative assumption.”

As a widely watched investor who says he likes to take big stakes in publicly traded companies and work with management to improve the business, Ackman often moves stock prices. Fortune Brands Home & Security jumped over 5 percent when news of his pick hit news wires and the Internet. It closed up 80 cents, or 5.8 percent, at $14.50.

Even without a housing recovery, the company has strong businesses including its Moen faucets and MasterLock segments. Ackman tapped his analyst Ali Namvar to make the presentation about the company.

Pershing Square, which like many hedge funds is nursing losses this year, has long been familiar with the company as it first bought Fortune Brands a year ago. Pershing Square is off roughly 16 percent this year.

During the question-and-answer period, Ackman returned to the stage and fielded questions about his other holdings, including retailer J.C. Penney (JCP.N).

Lavishing more praise on Ron Johnson, the retailing executive who recently quit Apple (AAPL.O) to join J.C. Penney, Ackman said “(Former Apple CEO) Steve Jobs asked Ron why would you leave Apple and go to a ‘B’ at best company? And I think it is because Ron thinks he can turn it into an ‘A’ company.”

Reporting by Svea Herbst-Bayliss and Katya Wachtel, editing by Bernard Orr

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