We recently published a list of Bill Ackman’s Stock Portfolio: Top 9 Stocks to Buy. In this article, we are going to take a look at where Hilton Worldwide Holdings Inc. (NYSE:HLT) stands against other stocks to buy in Bill Ackman’s portfolio.
William Albert Ackman, more commonly known as Bill Ackman, is the founder and CEO of Pershing Square Capital Management, a hedge fund management company. Famous for his concentrated portfolio, with stakes in only 8 to 12 stocks at a time, Bill Ackman’s recent portfolio modification has revealed that 47% of his hedge fund is invested in just three stocks.
Analysis of his portfolio reveals that Bill Ackman invests in stocks that are mispriced relative to the long-term value of the company. Historically, this philosophy has served him well since Pershing Square’s total value was just under $13 billion by the end of the third quarter of 2024 with only 9 stocks.
A longtime supporter of the Trump administration, Ackman has been vocal about the benefits that the newly elected president will bring to the investment front. In addition to the prospects of deregulation and corporate tax cuts that could allow for stock prices to rise and have made many investors bullish on the market, Bill Ackman has more vested interests in the Trump office. Pershing has a roughly 10% stake in the common shares of the government-sponsored entities. He took to X to discuss his hypothesis about how Donald Trump could help these giants exit government conservatorship and be recapitalized, leading to substantial shareholder gains for Pershing Square.
In early 2024, Ackman launched a U.S. closed-ended fund called Pershing Square USA, Ltd., and talked about it during his 2024 letter to investors:
“The launch of PSUS is one of a number of strategic initiatives we plan to undertake which we believe will increase the long term sustainability of Pershing Square Capital Management, L.P., (“PSCM” or the “Investment Manager”), and will benefit PSH by reducing the performance fees that it pays. To this end, in June, we sold a 10% interest in PSCM, the proceeds of which will be used to anchor new fund launches including PSUS.”
However, Pershing Square officially canceled its IPO just one day after filing with the SEC due to a $2 billion listing as opposed to its original target valuation of $25 billion. Finally, while announcing the IPO cancellation on X, Ackman wrote “We will report back once we are ready to launch a revised transaction,” hinting at the possible launch of PSUS without listing shares on a stock exchange.
Our Methodology
The stocks discussed below were picked from Pershing Square’s Q3 2024 13F filings. They are compiled in the ascending order of Pershing Square’s stake in them as of September 30, 2024. In order to assist readers with more perspective, we have included the hedge fund sentiment regarding each stock using data from over 900 hedge funds tracked by Insider Monkey in the third quarter of 2024.
Why are we interested in 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).
Empty lobby of a high-end hotel showcasing the modern, luxurious interior of the hotel chain.
Hilton Worldwide Holdings Inc. (NYSE:HLT)
Number of Hedge Fund Holders as of Q3: 69
Pershing Square’s Equity Stake: $1.70 Billion
Founded in 1919 and headquartered in McLean, Virginia, Hilton Worldwide Holdings Inc. (NYSE:HLT) is an American multinational hospitality company that manages and franchises a broad portfolio of hotels, resorts, and timeshare properties. The company owns and operates three major kinds of hospitality businesses: luxury and full-service hotels and resorts, extended-stay suites, and focused-service hotels. Apart from boarding and lodging, Hilton Worldwide Holdings Inc. (NYSE:HLT) offers its guests food, restaurants, dining, and loyalty programs.
Pershing Square owns over 7.37 million shares of the company as of Q3 2024, with a total value of nearly $1.70 million. During the third quarter of 2024, the fund decreased its stake in Hilton Worldwide Holdings Inc. (NYSE:HLT) by 17.67% from 8.95 million. However, by the end of the September quarter, 68 funds out of the 900 funds tracked by Insider Monkey held stakes in Hilton worth over $6.26 billion, up from 64 funds by the end of Q2 which suggests an overall positive hedge fund sentiment about the stock.
The most recent earnings results of Hilton Worldwide Holdings Inc. (NYSE:HLT) reported that the company has beat the consensus estimate of $1.84 by $0.08, posting earnings per share for the quarter to be $1.92 against $1.55 EPS for the same period in 2023. September marked the end of the third consecutive quarter wherein the company beat analyst expectations for its EPS. The quarterly revenue was reported as $2.87 billion, up 7.26% compared to $2.67 billion for the same quarter last year. Its net income for the third quarter of 2024 was $344 million, reflecting a year-over-year decrease of 8.75%. Operating income was $ 622 million, down 4.31% from the same quarter of 2023.
Hilton Worldwide Holdings Inc. (NYSE:HLT) is set to significantly expand its presence in the fast-growing lifestyle hotel category, with plans to double its portfolio from 350 to 700 properties by 2028. This growth is driven by strong demand from both guests and hotel owners, fuelled by Hilton’s recent acquisition of Graduate Hotels and NoMad. In 2023 alone, Hilton added over 50 new lifestyle hotels and approved another 100, with expectations to open over 100 more in 2024. The addition of Graduate and NoMad brands will further support this expansion, including the debut of NoMad’s flagship London hotel and several new Graduate properties. According to Kevin Jacobs, chief financial officer, and president, as Hilton celebrates 10 years in the lifestyle segment, the company is focused on rapid growth, aiming to provide distinctive, localized travel experiences in top global destinations.
Pershing Square stated the following regarding Hilton Worldwide Holdings Inc. (NYSE:HLT) in its Q2 2024 investor letter:
“In the first half of 2024, Hilton 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.”
Overall, HLT ranks 2nd on our list of stocks to buy in Bill Ackman’s portfolio. While we acknowledge the potential for HLT as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than HLT but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.