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Overseen by billionaire hedge fund manager Bill Ackman pershing square capital management (PSHZ.F 1.40%). At his current size of $14 billion, the fund has returned 28% annually over the past five years.That’s more than double S&P500 meanwhile.
So what’s his secret? I just jumped into Pershing Square’s stock portfolio, which only has 8 stocks. Analyzing our holdings reveals a simple but effective strategy. No, it’s not just about buying mega-cap tech stocks (though Ackman bought more hands than fists in 2023).
Here’s what you need to know:
Pershing Square Portfolio
2 core holding companies
Bill Ackman is bullish on American gluttons. Pershing Square’s portfolio is built on large positions. Chipotle Mexican Grilla casual Mexican restaurant chain (16.5% of the portfolio), and restaurant brand international, Tim Hortons, Burger King, Popeyes Louisiana Kitchen, and Firehouse Subs (14.7%). These companies account for more than 31% of Pershing Square’s holdings.
The following layers are tightly grouped
Unlike Warren Buffett, apple as berkshire hathawayAs the company’s largest shareholder, Ackman is taking a more balanced approach with other holdings. His next four tickers range from 10.6% to 14.6% of his Pershing Square portfolio.
- Hilton Worldwide Holdings (14.6%): A hospitality business that works with several hotel and resort brands around the world.
- Lowe’s Companies (13.8%): 2nd largest home improvement retailer in the US
- howard hughes holdings (12.9%): Diversified real estate development company.
- CANADIAN PACIFIC KANSAS CITY LIMITED. (10.6%): A transcontinental railroad company operating in the United States and Canada.
These investments don’t come close to Chipotle or Restaurant Brands International, but they’re clearly in the second tier. Ackman remains primarily in the consumer space, but has branched out into additional discretionary spending categories such as hotels and home improvement.
Real estate and railroads are among America’s oldest industries, but they remain essential to the economy today. It definitely makes sense to touch on both.
Mr. Ackman’s recent stock picks are AI stocks.
Pershing Square hasn’t been very strong on technology stocks, but that has changed somewhat with the opening of a position in Q1 2023. alphabet. Mr. Ackman added both A and C class shares, his two tickers for the same company (Class A shares have voting rights).
He ranked in both the second and third quarters last year. Combining positions in both stock classes, Alphabet’s total weight is approximately 17% of Pershing Square’s portfolio, making it the company’s most significant investment in a single company.
Alphabet makes most of its money from advertising through Google search and YouTube, but it’s also an AI stock. The company is well-funded and is developing and deploying generative AI technology across its business.
Two takeaways from Ackman’s investment strategy
Lesson 1: Bet on the consumer.
Technology stocks get a lot of media coverage, but consumers are the driving force behind the U.S. economy. Approximately 67% of America’s economic output comes from consumer spending. Mr. Ackman has positioned Pershing Square’s portfolio accordingly. Four of Pershing Square’s eight stocks are consumer-facing, totaling about 60% of its portfolio.
Consumer stocks typically have a simple business model, which can potentially benefit many investors. Understanding how the business behind a stock works is essential for investing as it allows you to spot opportunities and threats more easily.
Tip 2: Become a long-term investor
While some might think of professional money managers as traders who move in and out of stocks on a regular basis, Ackman disagrees. Although he has sometimes stopped baiting when he thought he had made a mistake, his portfolio broadly shows his long-term thinking. The dates he first purchased each of his current holdings are:
Note: Howard Hughes Holdings was formed in 2010 after General Growth Properties went bankrupt during the financial crisis.
stock | First purchase |
---|---|
restaurant brand international | Q4 2014 |
Chipotle Mexican Grill | Q3 2016 |
Hilton Worldwide Holdings | Q4 2018 |
Lowe’s Companies | Q2 2018 |
CANADIAN PACIFIC KANSAS CITY LIMITED. | Q4 2021 |
Alphabet class A | Q1 2023 |
Alphabet class C | Q1 2023 |
Data source: Whale Wisdom.
It is difficult to predict the stock market in the short term. Easily influenced by politics, news, and the economy. However, over time, stock prices tend to rise or fall depending on the performance of the underlying company.
Mr. Ackman prefers to focus on a narrow group of high-conviction stocks, allowing time to let fundamentals dictate investment returns. Investors are usually better off with a more diverse portfolio than what we see here, but a peek inside Pershing’s Square is a fascinating act.
Alphabet executive Suzanne Frye is a member of The Motley Fool’s board of directors. Justin Pope has no position in any stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Apple, Berkshire Hathaway, Canadian Pacific Kansas City, Chipotle Mexican Grill, and Howard Hughes. The Motley Fool recommends Lowe’s Companies and Restaurant Brands International. The Motley Fool has a disclosure policy.
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