In this article, we will take a look at the 7 stocks that activist investor and billionaire Bill Ackman is buying. If you want to skip our detailed analysis on Bill Ackman’s history, investment philosophy, and hedge fund performance, go directly to Activist Investor and Billionaire Bill Ackman is Buying These 2 Stocks.
Hedge fund manager Bill Ackman is one of the most famous activist investors in the US. Mr. Ackman runs the hedge fund called Pershing Square Capital Holdings, of which he is the chief executive officer and which he founded in 2003. Pershing Square Capital Holdings is headquartered in New York City, and as of the end of the second quarter, it has a portfolio value of $10.7 billion. The executive is an alumnus of Harvard University, having received both his Bachelor’s in Arts and Master’s of Business Administration from the prestigious Ivy League university.
As compared to some of the other multi-billion-dollar hedge funds out there, Pershing Square Capital Holdings has a small portfolio. Mr. Ackman’s top picks in this portfolio include well-known hospitality and retail names such as Lowe’s Companies, Inc. (NYSE:LOW), Chipotle Mexican Grill, Inc. (NYSE:CMG), and Hilton Worldwide Holdings Inc. (NYSE:HLT).
Bill Ackman of Pershing Square
Our Methodology
To understand Mr. Ackman’s trading strategy, we look through the 13-F filings of his hedge fund Pershing Square Capital Management. This lets us gauge the dollar amount of investment made in each company and the number of shares held, revealing his sentiment about the companies. This information is supplemented with earnings reports and analyst sentiments for each stock, alongside our hedge fund sentiment analysis.
Why should we pay attention to Bill Ackman’s stock picks? Insider Monkey’s research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 86 percentage points since March 2017. Between March 2017 and July 2021, our monthly newsletter’s stock picks returned 186.1%, vs. 100.1% for the SPY. Our stock picks outperformed the market by 86 percentage points (see the details here). That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to. You can subscribe to our free newsletter on our homepage to receive our stories in your inbox.
Activist Investor and Billionaire Bill Ackman is Buying These 7 Stocks
7. Domino’s Pizza, Inc. (NYSE:DPZ)
Bill Ackman’s Stake Value: $951.3 million
Percentage of Bill Ackman’s 13F Portfolio: 8.8%
Number of Hedge Fund Holders: 31
Domino’s Pizza, Inc. (NYSE:DPZ) is one of the oldest pizza restaurants in the world, since it was founded in 1960 in the United States. It now operates in thousands of locations worldwide and focuses on three operating segments namely franchises, supply chain and stores.
Pershing Square held 2 million Domino’s Pizza, Inc. (NYSE:DPZ) shares by the second quarter, worth $951 million and representing 8.8% of the fund’s portfolio. In the same period, 31 of the 873 hedge funds polled by Insider Monkey held a stake in the company. In its second quarter, the company reported non-GAAP earnings per share (EPS) of $3.12 and revenue of $1.03 billion, beating analyst expectations on both counts.
In an October investor note, MKM analyst Brett Levy raised the company’s price target to $515 and set a Neutral rating on the stock, sharing macroeconomic concerns.
Domino’s Pizza, Inc. (NYSE:DPZ)’s largest shareholder after Pershing Square is Jim Simons’ Renaissance Technologies, who owns 1.2 million of the company’s shares that are worth $572 million.
Domino’s Pizza, Inc. (NYSE:DPZ) joins Mr. Ackman’s other top picks including hospitality and retail names such as Lowe’s Companies, Inc. (NYSE:LOW), Chipotle Mexican Grill, Inc. (NYSE:CMG) and Hilton Worldwide Holdings Inc. (NYSE:HLT).
In a second quarter 2021 letter, Pershing Square had the following to say about the company:
“In March, PSH initiated an investment in Domino’s Pizza. Domino’s is the number one pizza company in the world and, along with its franchisees, operates more than 18,000 stores globally. As 98% of the system is franchised, the company generates most of its profits from high-margin brand royalty fees, and the balance from company-owned stores and a supply chain business that supplies North American franchisees.
We have long admired Domino’s due to its compelling customer value proposition, best-in-class digital infrastructure, consistent track record, exceptional unit economics and world-class management team. Domino’s menu in the U.S. has featured its core $5.99 and $7.99 everyday value platforms for more than a decade, which are amongst the lowest-cost meals for a family of four. The company generates 75% of its sales through digital channels – by far the highest in the industry. Ownership of the leading digital and delivery infrastructure enables Domino’s to consistently deliver an outstanding customer experience as well as attractive economics to drivers, franchisees, and shareholders, all without using third-party delivery providers in the U.S. This strong value proposition and efficiency have led to consistent same-store sales growth of highsingle-digits in the U.S., and mid-single-digits internationally.”
6. The Howard Hughes Corporation (NYSE:HHC)
Bill Ackman’s Stake Value: $1.3 billion
Percentage of Bill Ackman’s 13F Portfolio: 12.25%
Number of Hedge Fund Holders: 25
The Howard Hughes Corporation (NYSE:HHC) is an American real estate company that operates across several segments. These include both residential and commercial properties, and the company does this through four operating segments. It both acquires and develops real estate properties.
Bill Ackman’s Pershing Square, by the end of the second quarter, had held 13.4 million The Howard Hughes Corporation (NYSE:HHC) shares that were worth $1.3 billion. Out of the 873 hedge funds polled by Insider Monkey, 25 held a stake in the company during the same time period.
In a second quarter 2021 letter, Pershing Square said:
“HHC’s MPCs in Houston, Texas, and Las Vegas, Nevada, are situated in tax-advantaged states which are beneficiaries of the continuing trend of out-of-state migration from California and other higher-tax states. New home sales in HHC’s MPCs, a leading indicator of future demand, increased 23% in the second quarter, and show signs of continued strength.
HHC’s NOI increased 20% sequentially relative to the first quarter, and 42% compared to the prior year, driven by a strong recovery across retail and hospitality assets which were most impacted by COVID 19. Retail rent collections have steadily improved to 80% benefiting from a rebound in foot traffic and strong leasing activity in the company’s retail footprint in Downtown Summerlin and Ward Village. Likewise, hospitality NOI in the second quarter substantially improved from breakeven profitability in Q1 as overall occupancy levels in HHC’s hotels increased by nine percentage points.”
5. Restaurant Brands International Inc. (NYSE:QSR)
Bill Ackman’s Stake Value: $1.53 billion
Percentage of Bill Ackman’s 13F Portfolio: 14.25%
Number of Hedge Fund Holders: 22
Restaurant Brands International Inc. (NYSE:QSR) is an American food chain that is the owner of some of the world’s most popular fast food restaurants. These restaurants include Burger King, Tim Hortons and Popeyes. It is a multinational company that operates in more than 100 countries all over the globe.
By the end of the second quarter, Pershing Square held 23.6 million shares of Restaurant Brands International Inc. (NYSE:QSR) worth $1.5 billion and representing 14.25% of its portfolio. At the same time, 22 of the 873 hedge funds polled by Insider Monkey held a stake in the company. In its second-quarter earnings, the company reported non-GAAP EPS of $0.77 and revenue of $1.44 billion, beating analyst estimates on both counts. In a September note, Loop Capital set a $65 price target for the company and set its rating to hold.
Restaurant Brands International Inc. (NYSE:QSR) largest stakeholder is Mubadala Investment’s MIC Capital Partners, with 672,998 shares worth $43 billion.
Restaurant Brands International Inc. (NYSE:QSR) joins Mr. Ackman’s other top picks including hospitality and retail names such as Lowe’s Companies, Inc. (NYSE:LOW), Chipotle Mexican Grill, Inc. (NYSE:CMG) and Hilton Worldwide Holdings Inc. (NYSE:HLT).
Pershing Square said the following about the company in a second-quarter letter:
“QSR’s franchised business model is a high-quality, capital-light, growing annuity that generates high-margin brand royalty fees from three leading brands: Burger King, Tim Hortons and Popeyes. The company has nimbly navigated the COVID-19 pandemic and continues to make progress on returning its brands to sustainable long-term growth.
Since the onset of the COVID-19 pandemic, the company has bolstered its safety procedures and is accelerating its digital investments by expanding its delivery footprint, modernizing its drive-thru experience, increasing mobile ordering adoption, and improving its loyalty programs. As the global recovery continues to be uneven, these initiatives will allow the company and its franchisees to serve customers in a safe and reliable manner.
Each of the company’s brands are at various stages in recovery, with Burger King and Popeyes having returned to growth, while Tim Hortons is well on its way to recovering. On a two-year basis, same-store-sales grew 2.4% at Burger King and 24.4% at Popeyes during the last quarter. Meanwhile, Tim Hortons in Canada has improved to a mid-single digit decline in July, with each month during the second quarter showing sequential improvement. Tim Hortons’ slower recovery is largely driven by strict COVID-19 restrictions in Canada, which were only recently lifted in large provinces such as Ontario. In rural and suburban parts of Canada where restrictions were lifted earlier, Tim Hortons has already returned to growth. Given the habitual nature of Tim Hortons’ customer base, the recovery in sales will be tied to mobility and reopening.
The company expects to return to its historical mid-single-digit unit growth this year, and recently announced expansions for both Tim Hortons and Popeyes in large international markets. As underlying sales trends at each of its brands continue to improve, and as the impact from COVID-19 restrictions ease, we believe Restaurant Brands’ share price will more accurately reflect our view of its improving business fundamentals.”
4. Hilton Worldwide Holdings Inc. (NYSE:HLT)
Bill Ackman’s Stake Value: $1.54 billion
Percentage of Bill Ackman’s 13F Portfolio: 14.37%
Number of Hedge Fund Holders: 22
Hilton Worldwide Holdings Inc. (NYSE:HLT) is a renowned hospitality chain that is headquartered in the United States. It is best known for its Hilton hotels and it either manages, offers franchises or directly owns its properties. The company is a multinational company and owns thousands of properties in more than 100 countries.
By the end of the second quarter of this year, Bill Ackman’s Pershing Square held 12.7 million shares of Hilton Worldwide Holdings Inc. (NYSE:HLT) with the stake equaling $1.5 billion and representing 14.25% of its portfolio. At the same time, 79 of the 873 funds polled by Insider Monkey held a stake in the company. During its financial report for the second quarter, Hilton Worldwide Holdings Inc. (NYSE:HLT) reported non-GAAP earnings per share (EPS) of $0.56 and revenue of $1.3 billion, beating analyst estimates for both. In an analyst note shared in October, Loop Capital analyst Alton Slump set a price target of $80 for the stock.
The company’s biggest hedge fund holder after Pershing Square is Natixis Global Asset Management’s Harris Associates, who holds 9.4 million shares that are roughly worth $1.14 billion.
Pershing Square in its second quarter investor letter highlighted that:
“While the hotel industry has been extremely negatively impacted by the COVID-19 pandemic, Hilton has done an excellent job navigating industry volatility, a testament to the company’s high-quality, asset light, high-margin business model and superb management team. From the moment the pandemic began, Hilton’s management team took decisive actions to ensure the company not only managed through what it knew would be a challenging period, but also positioned the company to generate improved margins, cash flows and investment returns once the business recovers to pre-COVID-19 demand levels.”
3. Chipotle Mexican Grill, Inc. (NYSE:CMG)
Bill Ackman’s Stake Value: $1.6 billion
Percentage of Bill Ackman’s 13F Portfolio: 15.72%
Number of Hedge Fund Holders: 35
Chipotle Mexican Grill, Inc. (NYSE:CMG) is an American restaurant company headquartered in California that is known for its unique menu items that offer Mexican foods. The company has outlets not only in the United States but all over the world at thousands of locations.
Pershing Square had held 1.08 million Chipotle Mexican Grill, Inc. (NYSE:CMG) shares by the end of the second quarter that were worth $1.6 billion and represented 15.72% of its portfolio. Out of the 873 hedge funds polled by Insider Monkey, 35 held a stake in the company during the same time period. At the end of its second quarter, Chipotle Mexican Grill, Inc. (NYSE:CMG) posted GAAP EPS of $6.60 and revenue of $1.89 billion, beating analysts on both counts. In an October investor note Wells Fargo raised its price target to $2,180, citing a strong sales growth.
In Pershing Square’s second quarter 2021 letter, it mentioned the company and stated that:
“Chipotle’s track record of superb performance has continued in 2021, driven by ongoing strength in digital sales and a recovery of in-store ordering. Digital gains achieved during the pandemic have proven resilient, with digital sales growing 11% in Q2 compared with the prior year, highlighting the limited overlap with in-person occasions. The company has now recovered about 70% of its pre-pandemic in-restaurant sales volumes, with the opportunity to drive these sales meaningfully higher once more schools and workplaces reopen after Labor Day. Near-term performance is accelerating, with management forecasting same-store sales growth from 2019 levels in the low- to mid-20% range in Q3, up from 18% growth last quarter.”
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Disclosure: None. Activist Investor and Billionaire Bill Ackman is Buying These 7 Stocks is originally published on Insider Monkey.
