In this article, we will take a look at billionaire Bill Ackman’s top 6 stock picks. If you want to see more of billionaire Bill Ackman’s stock picks, go directly to Billionaire Bill Ackman’s Top 3 Stock Picks.
Billionaire William ‘Bill’ Ackman is the founder of Pershing Square Capital Management, otherwise known as Pershing Square, a hedge fund with a 13F portfolio of over $7.8 billion as of September 30.
In terms of 2022, Pershing Square’s equity positions have fallen around 22% year to date. Due to Ackman’s hedging however, his fund is down 8% on a gross basis according to Institutional Investor as of November 17, 2022. In terms of Ackman’s hedging, his firm made about $2 billion from Ackman’s bet that interest rates will rise.
In terms of inflation, Ackman has said inflation could be structurally higher than it has been historically. Ackman says, “We don’t believe the Fed is going to get back to 2 percent.” Due to deglobalization, Ackman thinks outsourcing to cheap labor markets might not be as cheap in the future. Ackman also thinks the transition to alternative energy could be expensive.
If Ackman is right, interest rates could potentially be higher for periods of time too given the higher inflation.
Inflation
Given Ackman’s bet, it’s clearly in the fund manager’s interest that rates go higher. Whether that happens in the long term is unclear.
In the past two decades, the United States has enjoyed sustained periods of low inflation and low interest rates with the Federal Reserve largely succeeding in its efforts to keep inflation around 2% or lower.
While inflation has been substantially higher in 2022 and interest rates have also increased, the U.S. Federal Reserve has made some progress in terms of its battle against inflation. In October, core inflation rose less than expected with the core index up 6.3%, down from 6.6% in September.
In the long term, the battle against inflation is uncertain as advancements in technology could be fundamentally deflationary and fiscal overspending by the United States could be fundamentally inflationary.
If the Federal Reserve succeeds in its efforts to keep inflation below 2%, the headwinds facing the market could decrease.
Ackman’s Bets
In terms of Bill Ackman’s bets, Pershing Square has 13F equity positions in six stocks as of September 30 – The Howard Hughes Corporation (NYSE:HHC), Canadian Pacific Railway Limited (NYSE:CP), Hilton Worldwide Holdings Inc. (NYSE:HLT), Restaurant Brands International Inc. (NYSE:QSR), Chipotle Mexican Grill, Inc. (NYSE:CMG), and Lowe’s Companies, Inc. (NYSE:LOW).
Of Ackman’s bets, only Canadian Pacific Railway Limited (NYSE:CP) and Restaurant Brands International Inc. (NYSE:QSR) are up year to date, while The Howard Hughes Corporation (NYSE:HHC), Hilton Worldwide Holdings Inc. (NYSE:HLT), Chipotle Mexican Grill, Inc. (NYSE:CMG), and Lowe’s Companies, Inc. (NYSE:LOW) are each lower with market headwinds being one reason for the declines.
Ackman also exited out of Dominos Pizza Inc in the third quarter.
Methodology
For our list of Billionaire Bill Ackman’s Top 6 Stock Picks, we took all the stocks in Bill Ackman’s Pershing Square’s 13F equity portfolio at the end of Q3 and ranked them based on the firm’s stake value in the stocks.
Billionaire Bill Ackman’s Top 6 Stock Picks
6. The Howard Hughes Corporation (NYSE:HHC)
Pershing Square Capital Management’s Stake Value as of 9/30: $754,421,000
Percentage of Pershing Square Capital Management’s 13F Portfolio as of 9/30: 9.57%
Bill Ackman’s fund kept its share count in The Howard Hughes Corporation (NYSE:HHC) constant in Q3 to end the quarter with a stake value of over three quarters of a billion dollars in the the residential land and commercial asset developer.
Although The Howard Hughes Corporation (NYSE:HHC) has high quality assets, the substantial increase in interest rates by the Federal Reserve has been a headwind for the housing market. With higher interest rates, mortgage rates have increased and fewer people can afford to purchase homes. With fewer potential home buyers, demand for The Howard Hughes Corporation (NYSE:HHC)’s properties isn’t as strong as it used to be.
Furthermore, The Howard Hughes Corporation (NYSE:HHC) stock is down substantially due to relative valuation given that the share prices of many other housing developers are down over 20% year to date. Nevertheless, Ackman likes the company’s asset quality and the hedge fund manager still believes the company’s management team has “superb capital allocation and development skills”.
Bill Ackman commented on The Howard Hughes Corporation (NYSE:HHC) in an August investor letter,
We believe HHC is extremely well positioned for the current inflationary environment due to its combination of high quality real estate assets and a largely fixed-rate liability structure. We expect the company to benefit from substantial land price appreciation and rental income growth in the coming years.
5. Canadian Pacific Railway Limited (NYSE:CP)
Pershing Square Capital Management’s Stake Value as of 9/30: $1,016,616,000
Percentage of Pershing Square Capital Management’s 13F Portfolio as of 9/30: 12.9%
Pershing Square Capital Management increased its share count in Canadian Pacific Railway Limited (NYSE:CP) by 418% in the third quarter to end the period with over 15.2 million shares worth an aggregate of almost $1.02 billion. Given railroads operate in an oligopolistic industry, Canadian Pacific Railway Limited (NYSE:CP) has pricing power that has insulated it from inflation thus far. For Q3, the company reported adjusted EPS of C$0.97 on sales of C$2.312 billion, versus Q3 2021’s C$0.88 and C$1.942 billion, for example. For the future, Ackman thinks the merger between Canadian Pacific Railway Limited (NYSE:CP) and Kansas City Southern could create further growth opportunities.
Bill Ackman commented on Canadian Pacific Railway Limited (NYSE:CP) in an investor letter in August,
CP is a high-quality, inflation-protected business led by a best-in-class management team that operates in an oligopolistic industry with significant barriers to entry. With an improving volume and pricing outlook combined with the upcoming transformational acquisition of Kansas City Southern (“KCS”), we believe that CP’s prospects are bright.
4. Hilton Worldwide Holdings Inc. (NYSE:HLT)
Pershing Square Capital Management’s Stake Value as of 9/30: $1,210,009,000
Percentage of Pershing Square Capital Management’s 13F Portfolio as of 9/30: 15.36%
Billionaire Bill Ackman’s fund inched up its share count in upscale hotels giant Hilton Worldwide Holdings Inc. (NYSE:HLT) by 2% to end the quarter with a stake of over $1.2 billion. For Q3 Hilton Worldwide Holdings Inc. (NYSE:HLT) reported adjusted EPS of $1.31 on sales of $2.37 billion versus the consensus of $1.24 and $2.45 billion. System wide comparable RevPAR rose 5% on a currency neutral basis for the period as demand for leisure travel increased year over year.
Ackman mentioned Hilton Worldwide Holdings Inc. (NYSE:HLT)’s valuation in an August investor letter,
We find Hilton’s valuation to be compelling given its industry leading competitive position, superb management team, attractive long-term net unit growth algorithm, pricing power, and best-in-class capital return policy.
Hilton Hotels traded for $135.48 on August 19 when Ackman published his investor letter, versus $137.91 on November 21.
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Disclosure: None. Billionaire Bill Ackman’s Top 6 Stock Picks is originally published on Insider Monkey.
