In this article, we discuss the top 4 stock picks in Bill Ackman’s 2022 portfolio. If you want to check out our detailed analysis of Pershing Square, go instead to Bill Ackman’s 2022 Portfolio: Top 7 Stock Picks.
4. The Howard Hughes Corporation (NYSE:HHC)
Pershing Square’s Stake Value: $1.4 billion
Percentage of Pershing Square’s Portfolio: 13.57%
Number of Hedge Fund Holders: 24
The Howard Hughes Corporation (NYSE:HHC) is a real estate development as well as management corporation headquartered in The Woodlands, Texas. The company was formed as a spin-off from General Growth Properties after the latter’s filing of Chapter-11 bankruptcy protection.
Rhizome Partners had some good things to say about Howard Hughes Corporation in their 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 proceed to HHC is 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.”
Moving on to analyst ratings, On April 14, Piper Sandler analyst Alexander Goldfarb raised the price target on Howard Hughes Corporation (HHC) to $120 from $115 while keeping an ‘Overweight’ rating on the shares after hosting meetings with the company’s management on April 12. Despite national housing trends “cooling,” the analyst said that “Howard Hughes is not seeing a slow down, driven by the imbalance of housing lot supply versus demand in its affordable, amenity rich communities.”
As of the first quarter of 2022, 24 hedge funds are bullish on the HHC stock and Pershing Square leads with the highest holding of equity in the company.
3. Hilton Worldwide Holdings Inc. (NYSE:HLT)
Pershing Square’s Stake Value: $1.5 billion
Percentage of Pershing Square’s Portfolio: 14.53%
Number of Hedge Fund Holders: 52
Hilton Worldwide Holdings Inc. (NYSE:HLT) is a 102 years old prominent global hospitality company that operates and franchises a broad number of hotels and resorts. The company has over 6,000 properties in 118 countries, of which, 5,405 are franchised while 690 properties are directly managed. Hilton uses different tiers to designate its properties including luxury, upper upscale, upscale, upper midscale, midscale etc.
Hilton had better than average Q1, 2022 earnings results. It beat EPS estimates by $0.05 with an Year on Year growth of 113% and a Gross Profit Margin of 73%. Following solid Q1 earnings report, Deutsche Bank analyst Carlo Santarelli raised the price target on Hilton Worldwide Holdings Inc. (NYSE:HLT) to $141 from $136 while assigning a ‘Hold’ rating on its equity.
Pershing Square has an optimistic outlook concerning Hilton. Here is what the fund’s investor letter for Q4, 2021 said about the company.
“Hilton is a high-quality business with a multi-year runway of accelerated earnings growth and an exceptional management team. Industry conditions poised to exceed pre-COVID levels in the near term.HLT well positioned for enhanced long-term performance.
-Average daily revenue per room (“RevPAR”) likely to recover to pre-COVID levels before the end of 2022.
-Occupancy is improving with average daily rate (“ADR”) already above pre-COVID levels.
-Ability to change room rates daily provides a hedge against inflation.
HLT well positioned for enhanced long-term performance.
-Market share is likely to increase over time.
-Committed to higher long-term structural margins given productivity actions.
-Substantial capital return over time.
COVID-19 validated HLT’s unique high-quality asset-light business model.
-Ability to deftly navigate the “1,000-year-flood” supports higher valuation.
Hilton is poised to deliver long-term earnings meaningfully greater than pre-2020 levels. HLT’s share price including dividends increased 40% in 2021 and has decreased 2% year-to-date in 2022.”
Pershing Square is the leading stakeholder in the company as of the first quarter of 2022. Eagle Capital Management is a distant second with an equity that makes up 3.33% of their portfolio.
2. Chipotle Mexican Grill, Inc. (NYSE:CMG)
Pershing Square’s Stake Value: $1.7 billion
Percentage of Pershing Square’s Portfolio: 17%
Number of Hedge Fund Holders: 38
Chipotle Mexican Grill, Inc. (NYSE:CMG) is another prominent American fast food restaurant chain that specializes in Mexican Tacos and Burritos and is the third food stock on Bill Ackman’s 2022 portfolio’s top 7 stock picks. Chipotle serves in almost 3000 locations in the US, Canada, France, United Kingdom and Germany.
Chipotle Mexican Grill Incorporated outperformed the estimates for revenue and EPS in the first quarter of 2022 by $14.42 and $0.07 respectively with a revenue of $2.02 billion and EPS of $5.70 growing year on year by 24% with a 38% gross profit margin.
Hedge funds sentiment around the stock is generally positive with 38 funds bullish on the CMG stock in Q1, 2022. Ensemble Capital issued its investor letter for the first quarter of 2022 where it devoted a portion to Chipotle Mexican Grill, Inc. (NYSE:CMG). Here is what the firm thinks about it.
“Chipotle (6.0% weight in the Fund): In a recent blog post called GREAT COMPANIES ARE FORGED DURING CRISIS we discussed why companies with economic moats, relevant products and services, and those that create stakeholder value are more resilient in the face of crisis than the average company. Less advantaged competitors, in turn, struggle, which creates opportunities for great companies to get even better.
We think Chipotle navigated the COVID environment better than any major quick-serve restaurant and has consequently gone from strength to strength. Indeed, from March 1, 2020 to March 31, 2022, Chipotle shares gained 106% versus the S&P 500 Restaurants Index’s 28% return, including dividends.
To be sure, going into 2020, Chipotle had some recent experience in managing through a crisis. Its self-inflicted foodborne illness crisis that occurred in 2015 and 2016 threatened to permanently impair Chipotle’s brand value and damage customer trust. While the company made some changes at the top, bringing in Brian Niccol as CEO, and reorganized its food preparation processes, it did not abandon its mission of providing customers with freshly-prepared, sustainably-sourced food. Even at the nadir of its crisis, the average revenue of a Chipotle restaurant remained in line with the average fast casual restaurant in the US.
When COVID arrived, Chipotle quickly made changes to its strategy. It had planned on doing a marketing push for its new Queso Blanco cheese dip in March 2020 but pivoted to free delivery to ensure its customers could get Chipotle during quarantine. Because Chipotle restaurants are all company-owned (versus most fast-food chains being franchise models), it was nimble amid panic in the restaurant industry. The company continued to build restaurants (161 new stores in 2020) and seized the opportunity to move into prime locations and add more “Chipotlane” drive-thrus…” (Click here to see the full text)
1. Lowe’s Companies, Inc. (NYSE:LOW)
Pershing Square’s Stake Value: $2 billion
Percentage of Pershing Square’s Portfolio: 20%
Number of Hedge Fund Holders: 65
Number 1 on the list of top 7 stock picks of Bill Ackman’s 2022 portfolio is Lowe’s Companies, Inc. (NYSE:LOW), commonly called Lowe’s. It is a home improvement company headquartered in Mooresville, North Carolina. The company has over 2,000 stores in the US and Canada. It is the second largest home improvement and hardware company, just behind The Home Depot.
This is one of the companies on the list that doesn’t have Pershing Square as the leading stakeholder. The number one spot is taken by Adam Capital with an equity worth $9.6 billion as of the first quarter of 2022 with Pershing Square at the second spot with shares worth $2 billion.
On May 19, DA Davidson analyst Michael Baker lowered the price target on Lowe’s Companies to $240 from $292, keeping the rating of ‘Buy’ on the shares after Lowe’s Q1, 2022 earnings. The company beat estimates by $0.29 on Earnings per Share at $3.51
The analyst said that Lowe’s Companies put up “solid numbers” against difficult comparisons but in a situation where interest rates are rising, home related stocks struggle outperforming despite good earnings results. Longer term however, Baker still likes Lowe’s Companies shares as its investment themes play out.
You can also take a peek at 5 Recession-Proof Dividend Stocks to Buy and 3 Tech Stocks to Buy Today According to Billionaire David Tepper
