Bill Ackman has 53% of his portfolio in these 3 stocks

Hedge fund operator Bill Ackman likes to make big bets. His Pershing Square Capital Management the fund has $10.4 billion in assets under management and is concentrated in just nine positions.

These are not night flight operations either. Almost all are large-cap or mega-cap stocks. Its smallest holding is Howard Hughes Holdings (NYSE: HHH), a $3.7 billion mid-cap stock. The reason Ackman is following these market giants is that he believes there are opportunities in their companies because of the role giant institutional investors play in their performance.

In June 2024 shareholders’ letterAckman explained that these “permanent owners” allow active investors to take advantage of price volatility created by “short-term, highly leveraged investors” who eat up a large percentage of a stock’s float. When even the smallest missed earnings “drive business valuations to levels well below long-term intrinsic value,” Pershing Square can pounce and take advantage of the opportunity.

Since its inception in 2004, the hedge fund has had a cumulative return of 1,933%, or a compound annual return of 15.7%, compared to a 630% return or 10.1% CAGR by the S&P 500.

Ackman’s three largest holdings are worth $5.5 billion and account for more than half of Pershing Capital’s holdings.

Key points about this article:

• Bill Ackman enjoyed a long, successful career, and Persching Square Capital Management The hedge fund has easily outperformed the broad market index for over 20 years.
• He likes to make big bets on stocks to take advantage of pricing opportunities and concentrates his holdings in just nine companies.
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Hilton Worldwide Holdings (HLT)

Hilton San Diego Bayfront Hotel

The largest position in the hedge fund is a hotel operator Hilton Worldwide Holdings (NYSE:HLT), even though it has sold shares in recent quarters. From its peak of 10.3 million shares, Pershing Square now owns 8.95 million shares valued at $1.95 billion. It represents 18.8% of its portfolio. Ackman’s average purchase price is just under $87 per share, giving him a return of 146% year-to-date.

Hilton has a global luxury brand presence with 24 world-class brands spanning nearly 7,800 properties. Its fast-growing Hilton Honors loyalty program of 195 million members is an important part of the hotelier’s growth, as they are highly engaged and account for two-thirds of all nights booked.

Hilton launched a mid-level brand last year named Spark by Hilton looking to tap into the economy premium market; opened an extended stay chain, LivSmart Studios; and made several acquisitions to give it extended coverage.

The hotel chain is experiencing revenue per available room (revPAR) growth, with total revenue rising 12% in the first half of 2024 to $5.5 billion. With Hilton benefiting from continued growth in the travel and tourism markets, expect HLT stock to continue to rise.

Chipotle Mexican Grill (CMG)

Chipotle Mexican Grill storefront

Chipotle Mexican Grill (NYSE: CMG ) was previously Ackman’s largest holding until he sold 22 percent of his holdings, or 8.4 million shares, in the second quarter. He now owns 28.8 million shares valued at $1.8 billion, or 40% fewer shares than he held a year ago. Chipotle makes up 17.3% of Pershing Square’s portfolio. However, with an average purchase price of just $8.82 per share, Ackman has a better gain of 511%.

It’s worth noting that Ackman’s trades came before Chipotle massive 50 for 1 stock split and its CEO jumped ship for Starbucks (NASDAQ:SBUX). He was able to take profits before the Mexican grocery chain saw its stock fall 23 percent from its all-time high.

However, the fact that it continues to make Chipotle such a large part of its portfolio indicates that it still sees plenty of growth on the horizon. It wouldn’t be surprising if Ackman sees depressed restaurant stocks as one of those opportunities where stocks have been driven below their long-term intrinsic value.

Restaurant Brands International (QSR)

Customers standing at the Burger King counter

Ackman’s third largest position is another restaurant operator, Restaurant Brands International (NYSE:QSR), owner of Burger King, Popeyes Louisiana Kitchen, Tim Hortons and Firehouse Subs.

While Ackman’s ownership position in RBI remained largely unchanged at about 23 million shares, he picked up an additional 381,000 shares in the second quarter. That brings his total holdings to 23.5 million shares, which are valued at $1.76 billion, good for a 16.7% position in Pershing Square’s portfolio.

Restaurant Brands International is betting big on turning around its Burger King franchise, which has been the company’s weakest link. Earlier this year, it acquired Carroll’s Restaurant Group, previously the largest franchisee of Burger King restaurants. It also acquired Popeyes China in late June. It plans to refranchise most of Carroll’s restaurants and is looking for a new partner for the chain in China.

With so many pieces moving towards RBI, the stock is down 12% in 2024. However, it generated Domino’s (NYSE:DPZ) CEO Patrick Doyle will serve as chairman and lend his expertise. It was Doyle who changed the direction of the pizzeria and turned it into the powerhouse it is today. Restaurant Brands International hopes it can work the same magic on burgers.

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