Pershing Square Holdings: “Share Price of The Howard Hughes Corporation (HHC) is at a Discount To Its Intrinsic Value”

Pershing Square Holdings, an investment holding company, released its second quarter 2022 investor letter. A copy of the same can be downloaded here. The fund generated NAV performance of -26% at the end of the first half, which was slightly higher than the total shareholder returns of -27.3%. Through August 16, 2022, the fund returned -10.8% compared to a -8.8% return for the S&P 500 index. In addition, you can check the top 5 holdings of the fund to know its best picks in 2022.

Pershing Square Holdings discussed stocks like The Howard Hughes Corporation (NYSE:HHC) in the second quarter investor letter. Headquartered in Dallas, Texas, The Howard Hughes Corporation (NYSE:HHC) is a construction company that owns, develops, and manages commercial, residential, and hospitality properties. On September 15, 2022, The Howard Hughes Corporation (NYSE:HHC) stock closed at $65.64 per share. One-month return of The Howard Hughes Corporation (NYSE:HHC) was -4.91% and its shares lost 25.16% of their value over the last 52 weeks. The Howard Hughes Corporation (NYSE:HHC) has a market capitalization of $3.276 billion.

Here is what Pershing Square Holdings specifically said about The Howard Hughes Corporation (NYSE:HHC)  in its Q2 2022 investor letter:

“The Howard Hughes Corporation (NYSE:HHC)’s portfolio of well-located residential land and income-producing commercial assets continues to demonstrate resilient performance despite recent macro concerns of a slowdown in the housing market. The company’s advantaged business model of owning master planned communities (“MPCs”) provides HHC substantial control over the planning and release of land for sale and development, enabling it to take a long-term approach to maximizing the value of its portfolio. As a result of its outright ownership of thousands of acres of conservatively financed land and a management team that combines superb capital allocation and development skills, the company is much less exposed to the cyclicality of stand[1]alone, smaller-scale real estate development companies.

HHC’s MPCs are attractively located in low cost-of-living, low-tax states like Texas and Nevada that are benefiting from significant in-migration. As mortgage rates have increased, the relative affordability and higher quality of life found in Summerlin (Las Vegas, Nevada) and Bridgeland (Houston, Texas), the company’s two MPCs with the substantial majority of remaining land sales, is highly appealing to prospective homebuyers. Although the pace of home sales has moderated from the post-pandemic surge experienced in 2021, housing inventory in HHC’s MPCs has been depleted and is near historical lows.

Homebuilder demand for lots remains strong and the company is experiencing significant growth in pricing due to the supply-demand imbalance, as evidenced by the 25% year-over-year increase in the average price per acre sold this quarter. Likewise, the company is experiencing robust performance across the rest of its portfolio. In its income-producing operating assets, this quarter NOI increased 15% year-over-year driven by the lease-up of new developments and significant increases in rental rates. The pace of condo sales in Ward Village has remained consistently strong due to the unique appeal of the development’s location in Hawaii…” (Click here to read the full text)

Photo by Jonathan J. Castellon on Unsplash

The Howard Hughes Corporation (NYSE:HHC) is not on the list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 24 hedge fund portfolios were held by The Howard Hughes Corporation (NYSE:HHC)  at the end of the second quarter which was 24 in the previous quarter.

We discussed The Howard Hughes Corporation (NYSE:HHC) in another article and shared Bernzott Capital Advisors’ views on the company. In addition, please check out our hedge fund investor letters Q2 2022 page for more investor letters from hedge funds and other leading investors.

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