We recently compiled a list of the Bill Ackman Stock Portfolio: 8 Top Stock Picks. In this article, we are going to take a look at where Hilton Worldwide Holdings Inc. (NYSE:HLT) stands against the other the Bill Ackman’s Stock Portfolio.

Bill Ackman is an investor whose portfolio is well-positioned to benefit from the economic environment’s improvement as interest rates trend down. In addition to being vocal about investment opportunities especially when there is a high risk reward, Ackman also does not shy away from giving his opinion on what he thinks is wrong. In September he took on the Brazilian Supreme Court justice on its decision to block Elon Musk’s social networking app. The billionaire investor reiterated that the decision could end up driving away investors and harming the country.

The “illegal shut down of X and account freeze at Starlink put Brazil on a rapid path to becoming an uninvestable market,” Ackman said in a post on X. “China committed similar acts leading to capital flight and a collapse in valuations. The same will happen to Brazil unless they quickly retreat from these illegal acts.”

It is not the first time that the legendary investor has echoed his opinion having already withheld a huge donation from Harvard University because of purported anti-Semitism. He also played a role in bringing down President Claudine Gay.

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Can Geopolitical Tensions and Inflation Impact Ackman’s Portfolio?

Ackman stands out among the top echelons because he focuses on high-quality large-cap companies with limited downside potential. Over the past five years, the billionaire investor has generated a 31% annualized return, affirming why he is one of the most revered investors on Wall Street.

The fundamental value investor has made a name for himself in investing and pushing for strategic changes in companies in a bid to increase shareholder value. Ackman’s investment strategy focuses on holding a limited number of companies, mostly eight to 12, for the long term in his portfolio.

As one of the sharpest investors on Wall Street,  Bill Ackman’s stock portfolio is well-positioned to benefit from an improving investment environment. The US Federal Reserve cutting interest rate by 50 basis points is increasingly emerging as a key catalyst poised to push the overall market higher.

While the S&P 500 was already up by more than 15% before the interest rate cut, it is currently flirting with record highs with more than 20% gains. The rally came on growing optimism that the lower interest rate environment would support the US economy, which was struggling, as depicted by weakness in the labor market and slow manufacturing.

While an accommodative interest rate environment is a must-welcome factor that could drive Ackman’s portfolio higher, a combination of regional conflict in the Middle East and rising inflation could curtail the gains. According to Stephen Roach, a senior fellow at Yale Law School’s Paul Tsai China Center, a completely blown conflict in the Middle East could trigger inflationary risks even as central banks start easing monetary policy.

Roach expects the markets to whipsaw back and forth amid heightened volatility in response to the geopolitical tensions. Kelvin Tay, regional chief investment officer at UBS Global Wealth Management, has already warned that Israel’s response to Iran’s attack could throw the Fed’s 50 basis point rate cut off track.

Bill Ackman’s portfolio could feel the effects of escalating geopolitical tensions in the Middle East on the investment environment turning jittery.  The portfolio suffered one of its biggest losses in July as it erased most of its 2024 gains. The portfolio lost 4.7% in the month, fueled by losses in one of Ackman’s investments in a large record label.

The string of negative losses persisted, with Ackman struggling to generate interest in his plan for one of his investment firms in the market. After failing to garner enough investor interest, the planned launch of Pershing Square USA (PSUS) IPO, which Bill Ackman once claimed could raise $25 billion, was canceled.

Ackman confirmed the withdrawal, reiterating that they will revisit the IPO once they are ready to launch a revised transaction. The pullback comes on investors raising concerns about the proposed fund’s structure and where he knew cash would be invested given that the market is at an all-time high with valuations getting out of hand. With that, let’s dig deeper into Bill Ackman’s stock portfolio.

Our Methodology

We sifted through Pershing Square’s Q2 2024 13F filings and picked the hedge fund’s top 8 stock picks. The stocks are ranked in ascending order of Pershing Square’s stake in them, as of June 30. We have also mentioned the hedge fund sentiment around each stock.

At Insider Monkey, we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).

Hilton Worldwide Holdings Inc. (NYSE:HLT)

Number of Hedge Fund Holders as of Q2: 64

Pershing Square’s Equity Stake: $1.95 Billion

Hilton Worldwide Holdings Inc. (NYSE:HLT) is the biggest holding in Bill Ackman’s stock portfolio, offering exposure to the hospitality sector. The company manages the franchising and leasing of hotels and resorts. While Ackman invested in the company first in 2016, he has grown his stakes to worth $1.9 billion.

Its edge as one of Ackman’s top stock holdings stems from its robust portfolio of 24 brands and over 7,600 hotels. Hilton benefits from its scale in several ways. It spends a lot of money on marketing, offering perks to consumers, and running a sizable loyalty program. With almost 190 million members, the Hilton program appeals to hotel operators, allowing  Hilton Worldwide Holdings Inc. (NYSE:HLT)  to allocate more funds for loyalty initiatives.

Over the past few years, Hilton has greatly increased the scope of its offerings and recovered well from the travel industry slowdown caused by the pandemic. Revenue is predicted to increase by 2% to 4% per available room in 2024 as it grows. Hilton Worldwide Holdings Inc. (NYSE:HLT)’s ongoing room additions should result in double-digit revenue growth overall.

The hotel chain’s revenue per available room (rear) is increasing; in the first half of 2024, total revenue increased by 12% to $5.5 billion. Hilton continues to benefit from expanding the travel and tourism industries, so HLT stock should continue to rise.

The company delivered solid second-quarter results, with diluted earnings per share increasing 17% year over year to $1.91 on adjusted earnings of $917 million. Analysts expect  Hilton Worldwide Holdings Inc. (NYSE:HLT) to demonstrate resilience despite a general slowdown in global revenue per available room because of its high mix of franchise fees and reduced exposure to internationally sensitive macroeconomic markets.

Insider Monkey saw that 64 hedge funds out of the 912 hedge funds held stakes in Hilton Worldwide Holdings Inc. (NYSE:HLT) as of the end of 2Q 2024.

Pershing Square Holdings, an investment holding company, released its Q2 2024 investor letter. This mentions Hilton Worldwide Holdings Inc. (NYSE:HLT). Here is what the fund said:

“In the first half of 2024, Hilton Worldwide Holdings Inc. (NYSE:HLT) generated strong revenue growth as the lodging industry experienced solid global demand against a favorable supply backdrop. Near-term industry trends remain positive, with continued strong international growth, improving business transient demand and extremely robust group demand, which is poised to sequentially accelerate in the third quarter. Leisure travel continued to moderate from the high levels of recent years following the COVID-19 reopening.

In the second quarter, HLT’s revenue per room (“RevPAR”), the industry metric for same-store sales, increased 3.5% as compared to 2023. Combined with strong 6% net unit growth, aggregate fee revenues grew 10%. Earnings per share grew 17% year-over-year, benefiting from Hilton’s excellent cost control and continued best-in-class capital return. Reflecting an incrementally challenging macroeconomic picture, principally in China, the company slightly reduced the upper end of their prior RevPAR guidance, now estimated by management to be +2% to +3%, while modestly increasing full year’s earnings guidance…” (Click here to read the full text)

Overall HLT ranks 1st on our list of Bill Ackman Stock Portfolio: 8 Top Stock Picks. While we acknowledge the potential of HLT as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than HLT, check out our report about the cheapest AI stock.

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Disclosure: None. This article is originally published at Insider Monkey.