We recently published a list entitled Billionaire Bill Ackman’s 2024 Portfolio: 6 Best Stocks to Buy in 2024. Since Hilton Worldwide Holdings Inc. (NYSE:HLT) ranks 2nd in the list, it deserves a deeper look.
Billionaire Bill Ackman recently made headlines after reports suggested he plans to take his investment firm public as soon as next year. A Wall Street Journal report said the 58-year-old billionaire was selling a stake in Pershing Square to investors as part of a funding round that could value the firm at about $10.5 billion. According to data from WSJ, Pershing Square managed over $16 billion in assets as of the end of April. The publication said Ackman has told investors that he plans to at least quadruple assets under management.
Ackman has run a concentrated portfolio for years. As of the end of the March quarter this year, his portfolio was worth over $10 billion, with just seven stocks. And yet Ackman made $610 million last year, coming in at the seventh position in Bloomberg’s annual list of the best-paid hedge fund founders.
In 2022, Ackman, who writes long and fiery posts on Twitter, announced that he was done with activist investing and was taking a “quieter approach.” In 2023, Pershing Square Holdings generated strong NAV performance of 26.7% versus 26.3% for its principal benchmark, the S&P 500 index.
Ackman talked in detail about the fund’s returns and future strategy during his 2023 letter to investors:
“While our investments in hedging and asymmetric instruments have been enormously profitable, we could have done better. In each of the three black swan events of the last 20 years, we had an early and highly variant view of the likely impact and probability of their occurrence and had identified and invested in instruments that offered profits many times their cost. In retrospect, we should have invested more and achieved even greater profits without risking materially more capital.”
For this article we scanned Ackman’s Q1 portfolio and picked his top six stock holdings. 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).
Hilton Worldwide Holdings Inc. (NYSE:HLT)
Billionaire Bill Ackman’s Q1’2024 Stake Value: $1,958,437,506
McLean, VA-based hotels and resorts company Hilton Worldwide Holdings Inc. (NYSE:HLT) is one of the best stocks to buy in 2024 according to Bill Ackman. Pershing Square owns a $1.96 billion. In April, Hilton Worldwide Holdings Inc. (NYSE:HLT) posted solid Q1 results. Revenue in the quarter rose 12.2% year-over-year to $2.57 billion. Hilton Worldwide Holdings Inc. (NYSE:HLT) expects system-wide RevPAR on a currency neutral basis to increase between 2% to 4% in 2024. Investors cheered Hilton Worldwide Holdings Inc.’s (NYSE:HLT) double-digit growth in sales during the quarter and also liked occupancy rate and higher average daily rates (ADR). EBITDA margins in the period expanded to 29.1%. Hilton Worldwide Holdings Inc. (NYSE:HLT) said its positive results were driven by better-than-expected international RevPAR performance, license fee growth, and timing items.
Hilton Worldwide Holdings Inc. (NYSE:HLT) is trading at 25x its 2025 EPS estimate set by Wall Street. Compared to the industry median P/E of 18.15 this metric is still high. However, given Wall Street expectations of a 16.00% growth in earnings for Hilton Worldwide Holdings Inc. (NYSE:HLT), the valuation level is justified. Over the next five years, Hilton Worldwide Holdings Inc. (NYSE:HLT) is expected to grow its earnings at 28.53% on a per-annum basis. Revenue growth in 2025 is expected to come in at 8%.
Baron Real Estate Fund stated the following regarding Hilton Worldwide Holdings Inc. (NYSE:HLT) in its first quarter 2024 investor letter:
“We recently acquired additional shares of Hilton Worldwide Holdings Inc. (NYSE:HLT). Hilton is the second largest hotel company in the world with 7,500 properties, 1.2 million rooms, 22 unique brands, and 180 million loyalty members in its database. Hilton has a superior executive team led by long-time CEO Chris Nassetta (over 16 years as CEO).
In March, we attended Hilton’s Investor Day in Washington, D.C. and also spent time with Chris in advance. Our main takeaway from the Investor Day presentations, besides being able to meet with a deeper and impressive layer of the management organization, is that Hilton’s growth prospects over the next five years are superior to the prior five due to: i) accelerating unit growth driven by new and existing brands; ii) several brand ‘seedlings’ planted with significant white space for growth (e.g., Graduate Hotels, SLH, LivSmart); and iii) Hilton’s better ability to capture the brand ‘conversion’ opportunity irrespective of new hotel construction/development…” (Click here to read the full text)
Overall, Hilton Worldwide Holdings Inc. (NYSE:HLT) ranks 2nd on Insider Monkey’s list of Billionaire Bill Ackman’s 2024 Portfolio: 6 Best Stocks to Buy in 2024. You can visit Billionaire Bill Ackman’s 2024 Portfolio: 6 Best Stocks to Buy in 2024 to see other stocks in the list. While we acknowledge the potential of Hilton Worldwide Holdings Inc. (NYSE:HLT), 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 Hilton Worldwide Holdings Inc. (NYSE: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.
Correction: The article was edited at 16:31 PM ET on June 13 to remove an analyst rating that was mistakenly attributed to Hilton Worldwide.
