In this article, we discuss 7 best stocks to buy now according to Bill Ackman. To see more stocks in this selection, click 4 Best Stocks to Buy Now According to Bill Ackman.
Bill Ackman is a billionaire American investor and hedge fund manager, known for his activist investment strategy. He founded his first investment firm, Gotham Partners, in 1992. Ackman made significant profits during the financial crisis of 2008 by selling credit default swaps against MBIA corporate debt on a significant profit. He founded Pershing Square in 2004, with a personal investment of $54 million.
Bill Ackman is known on Wall Street for his bold activist short selling techniques. His most famous activist campaigns have been with Canadian Pacific Railway Limited (NYSE:CP), Target Corporation (NYSE:TGT), Chipotle Mexican Grill, Inc. (NYSE:CMG), and Herbalife Nutrition Ltd. (NYSE:HLF).
At the end of March 2022, Pershing Square’s Bill Ackman said that he is changing his aggressive activist investment strategy, and instead of publicly ousting company flaws and malpractices, he will now focus on improving operations and delivering higher gains to shareholders.
“Pershing Square 3.0”
He calls the change in strategy “Pershing Square 3.0”and it was developed because the investor saw improved performance once he cut back on public fights and built larger stakes in top-quality companies. His quieter investment approach resulted in a 58% net return in 2019, a 70% net return in 2020, and a 26.9% return in 2021, exceeding the S&P 500 Index returns repeatedly. He told investors that this change in strategy is permanent, and he will no longer indulge in short selling, focusing instead on companies that require less operational amendments and generate substantial profits.
Some of the most notable stocks in Bill Ackman’s fourth quarter portfolio include Lowe’s Companies, Inc. (NYSE:LOW), Hilton Worldwide Holdings Inc. (NYSE:HLT), and Chipotle Mexican Grill, Inc. (NYSE:CMG), among others discussed in detail below.
Bill Ackman of Pershing Square
Our Methodology
We used the fourth quarter portfolio of Bill Ackman’s Pershing Square for this analysis, ranking the list according to the hedge fund’s stake value in each holding. Data from 900+ elite hedge funds tracked by Insider Monkey in Q4 2021 was used to identify the number of hedge funds that hold stakes in each firm.
Best Stocks to Buy Now According to Bill Ackman
7. Canadian Pacific Railway Limited (NYSE:CP)
Pershing Square’s Stake Value: $202,421,000
Percentage of Pershing Square’s 13F Portfolio: 1.87%
Number of Hedge Fund Holders: 55
Canadian Pacific Railway Limited (NYSE:CP) was incorporated in 1881 and is headquartered in Calgary, Canada. The company operates a transcontinental freight railway across Canada and the United States, carrying bulk commodities such as grain, coal, fertilizers, and merchandise freight. In mid-March, Canadian Pacific Railway Limited (NYSE:CP) halted operations amid a labor strike, which disrupted shipments of important commodities when prices were already soaring.
Securities filings reveal that Canadian Pacific Railway Limited (NYSE:CP) is a new acquisition of Bill Ackman’s Pershing Square as of the fourth quarter of 2021. The hedge fund purchased 2.8 million shares of Canadian Pacific Railway Limited (NYSE:CP) worth $202.4 million in Q4, representing 1.87% of the total 13F securities. The stock gained 4.1% as Ackman’s stake in the company was disclosed publicly. Between 2011 and 2016, Ackman ran a successful activist campaign at Canadian Pacific Railway Limited (NYSE:CP) and he recently reinvested as the stock went down for the first time since the investor exited his stake in 2016.
In 2021, Canadian Pacific Railway Limited (NYSE:CP)’s full-year revenue came in at $6.32 billion, compared to $6.05 billion in 2020. Net income also increased in 2021 to $2.25 billion from $1.92 billion in the previous year.
On January 27, Canadian Pacific Railway Limited (NYSE:CP) declared a C$0.19 per share quarterly dividend, in line with previous. The dividend is payable on April 25, to shareholders of record on March 25.
BofA analyst Ken Hoexter downgraded Canadian Pacific Railway Limited (NYSE:CP) on April 8 to Neutral from Buy with an $81 price target. He downgraded nine stocks in his Transportation coverage, citing worsening demand outlook and falling freight rates. The analyst told investors that Freight market signals have become “increasingly softer”, suggesting lower demand across the sector.
Chris Hohn’s TCI Fund Management is the biggest stakeholder of Canadian Pacific Railway Limited (NYSE:CP), with 55.8 million shares worth more than $4 billion. Overall, 55 hedge funds were bullish on the stock at the end of December 2021, up from 38 funds in the prior quarter.
In addition to Lowe’s Companies, Inc. (NYSE:LOW), Hilton Worldwide Holdings Inc. (NYSE:HLT), and Chipotle Mexican Grill, Inc. (NYSE:CMG), Canadian Pacific Railway Limited (NYSE:CP) is a notable stock to invest in according to Bill Ackman.
Here is what ClearBridge International Growth EAFE Strategy has to say about Canadian Pacific Railway Limited (NYSE:CP) in its Q3 2021 investor letter:
“The other major headwind to relative performance in the quarter was Canadian Pacific Railway Limited (NYSE:CP). The stock has been a strong performer for the Strategy but negative sentiment around its bidding war for U.S. rail operator Kansas City Southern has weighed on the stock since late May. As a result, the cyclical uptick we expected from the company has been masked by the takeover. Indeed, we have been frustrated by the muted performance among Canadian Pacific Railway Limited (NYSE:CP) and other recently added positions in our structural bucket of growth companies with more cyclical business models or that are undergoing a restructuring that should lead to a step change improvement in earnings. As more regions reopen from COVID-19 and spending rebounds, we expect better performance from our structural names, including Airbus and hospitality and food service provider Compass.”
6. Domino’s Pizza, Inc. (NYSE:DPZ)
Pershing Square’s Stake Value: $1,180,692,000
Percentage of Pershing Square’s 13F Portfolio: 10.95%
Number of Hedge Fund Holders: 31
Domino’s Pizza, Inc. (NYSE:DPZ) is an American multinational pizza company that operates worldwide via company-owned and franchised stores. In the fourth quarter of 2021, Bill Ackman’s Pershing Square owned more than 2 million shares of Domino’s Pizza, Inc. (NYSE:DPZ), worth $1.18 billion, representing 10.95% of the total Q4 holdings.
On March 1, Domino’s Pizza, Inc. (NYSE:DPZ) declared a $1.10 per share quarterly dividend, a 17% increase from its prior dividend of $0.94. The dividend was distributed on March 30, to shareholders of the company as of March 15.
Cowen analyst Andrew Charles downgraded Domino’s Pizza, Inc. (NYSE:DPZ) on April 5 to Market Perform from Outperform, cutting the price target from $480 to $390. The analyst further slashed his earnings estimates through 2024 below consensus, driven by a “disappointing” new franchise projection in the United States in 2022. He believes that Domino’s Pizza, Inc. (NYSE:DPZ)’s international openings will not offset the lower earnings in the U.S., since international outlets have about 60% of U.S. volumes and half the royalty rate.
Among the hedge funds tracked by Insider Monkey, 31 funds reported owning stakes in Domino’s Pizza, Inc. (NYSE:DPZ), compared to 36 funds in the earlier quarter. Renaissance Technologies holds a significant position in the company, with 955,878 shares worth $539.4 million.
Here is what LRT Capital Management has to say about Domino’s Pizza, Inc. (NYSE:DPZ) in its Q4 2021 investor letter:
“Domino’s Pizza is the world’s largest franchisor of pizza restaurants with over 13,800 locations in 85 countries. As for any restaurant operator, the key metric to consider for Domino’s Pizza is same-store-sales (SSS) growth. Growing same-store-sales are ultimately how a restaurant business increases earnings from its existing assets. The company continues to impress in this criterion with SSS having grown in the U.S. for 40 consecutive quarters, and an astounding 109 straight quarters internationally.
Two-thirds of the company’s stores are currently abroad, and the international segment remains the company’s largest growth opportunity, as the penetration of convenient fast food remains lower abroad than in the United States. Pizza is a product with exceptionally high gross margins, one that “translates” well across different cultures, and one that literally “travels well”, not losing much of its appeal when delivered in a cardboard box. The rise of 3rd party delivery platforms such as Uber Eats, Doordash and Grubhub is challenging the pizza category as it has expanded the number of choices consumers have for convenient takeout. However, the economics of food delivery remain challenging for most restaurants and platforms alike, while pizza delivery continues to be highly profitable. Regardless of how the “delivery wars” currently playing out end, Domino’s financial results show little impact of this increased competition, and the company continues to deliver exceptional financial performance.
Domino’s Pizza stock is not optically cheap based on forward earnings, however, the company has routinely reported earnings growth of over 20% in almost all quarters since 2009. Given the company’s high growth rate, international growth opportunities, and capital light business model, which allows for returns on invested capital of over 40%, we are happy to continue to hold the shares.”
5. The Howard Hughes Corporation (NYSE:HHC)
Pershing Square’s Stake Value: $1,386,260,000
Percentage of Pershing Square’s 13F Portfolio: 12.85%
Number of Hedge Fund Holders: 27
The Howard Hughes Corporation (NYSE:HHC) is a Texas-based diversified real estate company that owns and develops commercial, residential, and hospitality establishments in the United States. Bill Ackman owns a $1.38 billion stake in The Howard Hughes Corporation (NYSE:HHC) as of Q4 2021, accounting for 12.85% of his total 13F investments.
On March 15, The Howard Hughes Corporation (NYSE:HHC) announced the approval of a new $250 million share buyback program, on the heels of November’s buyback announcement of $250 million. This program reflects the company’s healthy balance sheet and underlying net assets.
The Howard Hughes Corporation (NYSE:HHC)’s full-year revenue for 2021 increased 104.13% from the prior year to $1.42 billion. The net income of $56.1 million in 2021 also rebounded sharply from the $20.1 million loss in 2020.
JPMorgan analyst Anthony Paolone initiated coverage of The Howard Hughes Corporation (NYSE:HHC) on January 31 with an Overweight rating and a $125 price target. According to the analyst, The Howard Hughes Corporation (NYSE:HHC)’s operating portfolio allows exposure to attractive themes like demographic shifts, the strengthening housing market, and commercial real estate development. The analyst believes there is a possibility for re-rating as the company streamlines its business.
According to Insider Monkey’s Q4 data, 27 hedge funds were bullish on The Howard Hughes Corporation (NYSE:HHC), with combined stakes worth $1.68 billion, compared to 25 funds in the previous quarter, holding stakes in the company worth $1.4 billion. Harris Associates is one of the leading position holders in The Howard Hughes Corporation (NYSE:HHC), with approximately 2 million shares valued at $203.3 million.
Just like Lowe’s Companies, Inc. (NYSE:LOW), Hilton Worldwide Holdings Inc. (NYSE:HLT), and Chipotle Mexican Grill, Inc. (NYSE:CMG), The Howard Hughes Corporation (NYSE:HHC) is one of the best stocks to buy now as per Bill Ackman’s Pershing Square.
Here is what Rhizome Partners has to say about The Howard Hughes Corporation (NYSE:HHC) in its Q4 2021 investor letter:
“In Q4, Howard Hughes Corporation (HHC) announced the sale of its Chicago office tower for more than $1 billion. The building was 85% leased at the time the sale was announced. HHC contributed the land, valued at $85 million, and an additional $5 million in cash. The expected pre-tax proceeds to HHC are estimated at $270 million. This is an outstanding outcome for an urban office development project delivered after Covid ravaged the office sector. The company also gained approval for its $850 million development project on the site of the former parking lot in the Seaport in New York City. This is an important milestone after a long and contentious zoning process. HHC also bought a 37,000-acre shovel-ready master-planned community in Phoenix, AZ, for $600 million. We still believe that the company is an excellent developer and each community continues to strengthen with the development of new amenities. This strength will eventually be manifested in rent growth, ample net operating income (NOI) upon stabilization, and simplification of the story over time. The market does not yet appreciate these unique characteristics of the Howard Hughes missions. We’ll continue to wait patiently for the market to agree with us.”
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Disclosure: None. 7 Best Stocks to Buy Now According to Bill Ackman is originally published on Insider Monkey.
