Billionaire Bill Ackman has 70% of his $10 billion portfolio in just four stocks

By | March 30, 2024

For individual investors, it can be rewarding to follow what the professionals are doing. If you’re a buy-and-hold investor, you can especially find ideas from like-minded investing legends. One investor we should follow closely is Bill Ackman of Pershing Square Capital Management. The billionaire investor manages a $10 billion portfolio for outside investors and owns positions in just seven stocks that he and the team have held for many years.

Here are four stocks that make up a whopping 70% of Ackman’s concentrated stock portfolio.

CMG Business Income Chart (TTM).

CMG Business Income Chart (TTM).

1. Successfully betting on a Chipotle rebound

Ackman’s second largest position is Chipotle Mexican Grill (NYSE: CMG). Pershing Square bought the shares after the restaurant chain ran into trouble in 2016 following an outbreak of foodborne illness at some of its locations. It helped the company turn around by bringing in new management and resolving its quality control issues.

Since mid-2016, Chipotle shares have returned about 632% to shareholders. Operating profit grew even faster, up 963% during the period, as the company regained store traffic and significantly improved margins. At the end of 2023, it had just under 3,500 stores in North America. Although the company is quite large today, management believes there is room to double the number of stores to 7,000 locations in North America alone, without considering any international expansion.

Add to that solid same-store sales growth, and Chipotle appears poised to continue its earnings growth for many years into the future. At just over 18% of his portfolio, this has been a big winner for Ackman and could continue to be so in the future.

QSR EPS Diluted (TTM) chartQSR EPS Diluted (TTM) chart

QSR EPS Diluted (TTM) chart

2. More awareness of restaurants

With 17.6% of the portfolio, there is again a large position for Pershing Square Restaurant brands International (NYSE:QSR). Like Chipotle, this is a bet on quick-service restaurant chains, with the company owning four brands: Firehouse Subs, Popeyes, Burger King and Tim Hortons. It was also one of Pershing Square’s long-term holdings, with the first purchase of the shares taking place back in 2014.

Restaurant Brands’ stock performance wasn’t as strong as Chipotle’s, but it still performed well for Pershing Square. The shares are up 194% since 2014, while earnings per share (EPS) are also up 654%. The company owns four different brands that give it diversified exposure to the entire restaurant sector with more than 30,000 restaurants around the world. For investors looking for sustainable stocks with low long-term downside, Restaurant Brands International seems like an excellent choice. It’s hard to imagine that in ten or twenty years there won’t be any Burger King and Tim Hortons locations left.

HLT Business Income Chart (TTM).HLT Business Income Chart (TTM).

HLT Business Income Chart (TTM).

3. A look at global travel

With 16.2% of the Pershing Square stock portfolio, Ackman has made another attempt to become a consumer brand Hilton Worldwide Holdings (NYSE: HLT). The investment company bought the shares in 2018 and bet on the growth of global travel. Hilton Worldwide owns the Hilton brand of the same name, as well as a number of other hotel brands such as Waldorf Astoria, Embassy Suites and DoubleTree.

Importantly, Hilton Worldwide does not actually own the hotel real estate, but licenses its brands to hotel operators. In return, Hilton receives a cut of all sales, which hotel owners are willing to do because the Hilton brand allows them to offer higher room rates than if they were an independent operator.

Hilton’s revenues haven’t grown much since 2018 due to the pandemic, with operating income up 77% and revenue up just 20%. But it appears a recovery is underway, with travel spending fully recovering in most markets. With its exposure to global travel, Hilton is poised to benefit from this recovery, and its business model is hedged against inflation. It’s no surprise that the shares will make up a large part of Ackman’s portfolio in early 2024. This is a great company with a long-standing global brand.

4. Don’t forget the largest holding company: Alphabet

Ackman’s largest asset, and his most recent purchase, is Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL). Pershing Square bought shares of the parent company of Google Search and YouTube in early 2023. It is now almost 19% of the equity portfolio.

Ackman likely bought Alphabet due to its declining valuation early last year, fearing it would lose the new artificial intelligence (AI) race to competitors like Microsoft. These fears proved unfounded, as Alphabet continued its earnings growth through 2023. The company’s operating profit hit a record high of $84.3 billion in 2023, sending the stock up 71% since the start of last year.

Alphabet looks like a typical Pershing Square bet. It’s a diversified holding company with long-standing global brands, and the hedge fund manager decided to pounce and make it a big position when its price-to-earnings (P/E) ratio fell to around 15 early last year.

Investors can learn a lot from Pershing Square and Ackman. He makes concentrated bets on stocks with strong brands that trade at reasonable valuations. He then holds his positions for many years and lets his winners run.

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Suzanne Frey, a director at Alphabet, is a member of The Motley Fool’s board of directors. Brett Schafer has positions at Alphabet. The Motley Fool holds positions in and recommends Alphabet, Chipotle Mexican Grill, and Microsoft. The Motley Fool recommends Restaurant Brands International and recommends the following options: long calls in January 2026 for $395 at Microsoft and short calls in January 2026 for $405 at Microsoft. The Motley Fool has a disclosure policy.

Billionaire Bill Ackman has 70% of his $10 billion portfolio in just 4 stocks was originally published by The Motley Fool

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