Billionaire investor Bill Ackman has 100% of his $10 billion portfolio in just 9 stocks, but there were seismic shifts during the quarter

Bill Ackman is a celebrity in the investing community. He runs Pershing Square Capital Management — the hedge fund he founded — which has more than $10 billion in assets under management. The well-known activist, who describes himself as a fundamental value investor, has made a name for himself by taking sizable stakes in companies and pushing leaders to make changes that increase shareholder value.

One of the more noteworthy aspects of Ackman’s investment strategy is that Pershing Square generally holds large stakes in just eight to 12 companies, and generally holds them for years. The hedge fund focuses on high-quality, large-cap North American companies with limited downside and recurring and predictable cash flows. This strategy has been tremendously successful for Ackman, as Pershing Square has generated an annualized return of 31% over the past five years, roughly double performance S&P 500.

Let’s look at the nine stocks that made up Pershing Square’s portfolio and the big changes Ackman made during the second quarter.

Image source: Getty Images.

1. Hilton: 19%

Pershing holds a long position in Hilton Worldwide Holdings (HLT 0.89%)owning nearly 9 million shares worth nearly $1.9 billion. Ackman took his first position in the hotel chain in late 2018, building that position during the pandemic, confident that the travel industry would recover. The move was prescient and was extremely profitable.

Ackman describes Hilton as a “high-quality business … led by an exceptional management team.” In the first half of 2024, Hilton’s revenue rose 11%, while adjusted earnings per share (EPS) rose 17%. Ackman cited the company’s “excellent cost control and best return on capital” as reasons for his bullish opinion. He also suggested that industry headwinds and international growth would fuel the sequential acceleration in the third quarter.

To raise funds for new purchases (more on that in a bit), Ackman sold about 228,000 shares of Hilton stock, down about 2%.

2. Restaurant brands: 16%

Ackman has a long history of betting on consumer spending, and his confidence in this long-term trend remains intact. Pershing Square owns more than 23 million shares Restaurant Brands International (QSR -0.65%)in a stake worth $1.6 billion. The company’s portfolio includes a number of well-known brands, including Burger King, Popeye’s, Firehouse Subs and Tim Hortons. Ackman took his first position in the company in 2012 — when it was still privately held — and increased his holdings during the pandemic.

Ackman points to Restaurant Brands’ “long-term growth potential, trading at a reduced valuation.” Total revenue rose 13% in the first half of 2023, as did EPS. He previously mentioned Restaurant Brands’ franchise royalty model, which he believes offers “decades” of potential growth.

The billionaire investor slightly increased his stake in Q2, adding 381,000 shares, up about 1.6%.

3. Chipotle: 15%

There was a seismic shift in Ackman’s portfolio during the quarter, and one of the biggest changes was that Chipotle Mexican Grill (CMG -2.78%). Ackman first took a stake in the fast-casual restaurant in late 2016 after the company faced a foodborne illness outbreak that sent the stock down more than 50 percent.

In the first quarter, it was by far Pershing’s largest holding, but the billionaire investor sold more than 8 million shares, reducing his position by 23%. That brings his current holding to nearly 29 million shares worth about $1.5 billion, representing 15% of the portfolio.

The move might seem surprising given Chipotle’s performance. In the second quarter, revenue rose 18%, while EPS rose 32%. The results were driven by same-store sales, which rose 11%.

So why did Ackman sell? Although he did not specifically address movement, it probably boiled down to assessment. Ackman’s preference for value investing is well-documented, and at 58 times sales (at the end of the quarter), he probably felt the price had outdone himself.

It’s worth noting that Ackman acknowledged the loss of Chipotle CEO Brian Niccol. Starbucks. He went on to suggest that Chipotle won’t miss a beat, thanks to the “tremendous team” that Niccol has built.

4. Howard Hughes Holdings: 13%

One position that remained unchanged during the quarter was Howard Hughes Holdings (HHH 0.04%). Pershing still owns nearly 19 million shares worth $1.3 billion, amounting to a 38 percent stake in the real estate and land developer. Ackman believes the Master Planned Communities (MPC) model will “drive resilient, long-term value creation.” In addition, the lack of inventory of existing homes for sale will continue to drive robust demand in the new home market.

Howard Hughes Holdings posted record MPC earnings before taxes (EBT) and record net operating income (NOI). If that sounds like another language, you’re not. This is a complicated business model that’s meant to generate continuous profits over years and decades, so it’s not for the faint of heart — but Ackman has clearly done his homework.

5. Alphabet (class C shares): 12%

In stark contrast to 2023, when Ackman added significantly to his Alphabet (GOOG 0.96%) position, now seems to be taking some money off the table. Pershing now owns 7.5 million Class C (non-voting) shares valued at approximately $1.2 billion, having sold 1.8 million shares and reducing its position by 20%. This marked the other notable change in his portfolio.

At that time, there was no material change in the business. Revenue rose 15% year-over-year in the second quarter, while EPS rose 31%. Ackman pointed to the company’s “significant investment” in artificial intelligence and its 2 billion users as driving future growth.

Ackman acknowledged the verdict in the antitrust case that found Google maintained an illegal monopoly, saying he was “monitoring closely.” That said, he believes “the company is well positioned to navigate a number of likely potential outcomes.”

Ackman’s sale of Alphabet stock took place before the court’s decision, so it probably came down to the assessment as well. A quick look at the stock charts shows that Class C shares continue to (modestly) outperform Class A shares, which might explain why Ackman owns more of the former. However, he also continues to hold Class A shares (see subchapter 7).

5. Canadian Pacific Kansas City: 12%

Like Warren Buffett and Bill Gates, Ackman has made a solid bet on North American railroads. He previously noted that rail is the cheapest and most viable way to transport heavy goods over long distances. As a result of this view, Ackman increased his stake again Canadian Pacific Kansas City (C.P -0.44%) in 2021 and currently owns nearly 15 million shares worth nearly $1.2 billion.

Ackman is attracted to “oligopolistic industry with significant barriers to entry.” He also says that Canadian Pacific’s acquisition of Kansas City Southern is “transformational,” noting that it is “the only railroad with a direct route connecting Canada, the United States and Mexico.”

In the second quarter, Canadian Pacific’s revenue rose 14% year-over-year, although adjusted EPS rose 27%. Ackman believes the company’s “unique network and industry-leading management team” will drive strong double-digit earnings growth in the coming years.

7. Alphabet (class A shares): 6%

Pershing also owns 4.3 million Alphabet (GOOGL 1.03%) class A shares — with voting rights — worth $693 million, having sold 368,000 shares, a drop in his holdings of about 8%. They are just a different class of shares for the same company, so the investment thesis here is the same. (See No. 4.)

8. Brookfield Corp: 3%

Ackman turned heads this week when Pershing revealed it had taken a stake Brookfield Corp. (BN 0.15%)an alternative asset manager and real estate investment. Rising interest rates have hurt many of its business segments, so the stock has been basically flat for the past three years, making it a compelling opportunity for Ackman. Pershing Square owns nearly 7 million shares of Brookfield in a $321 million stake, or about 3 percent of its portfolio.

Brookfield represents an eclectic group of businesses, and despite the challenging environment, the company generated distributable earnings (ED) before achievements that rose 11% year-over-year, while DE increased 80%.

To be clear, Ackman has yet to offer any insight into why he initiated this stake, saying he plans to “discuss these new investments at a later date.”

9. Nike: 2%

The other notable addition was NIKE (NKE 0.89%). Ackman now owns about 3 million shares of the athletic shoe and apparel company, worth about $239 million or 2 percent of Pershing’s portfolio.

While Ackman has yet to provide his logic, it is clearer. Nike shares have lost half their value in recent years as the ongoing battle with inflation has punished its growth. Revenue was flat for fiscal 2024 (ended May 31), although earnings per share rose 15%.

Given the company’s long track record, Ackman probably believes a change is inevitable. Moreover, at just 22 times trailing earnings, Ackman likely saw a deal that, as a value investor, he simply couldn’t pass up.