Renowned investor Bill Ackman, founder of Pershing Square Capital, has built a reputation for his astute investment strategies. By focusing on a select few high-quality businesses, Ackman seeks to unlock shareholder value through his influence. This approach has led to a highly concentrated portfolio, with just three stocks accounting for over 53% of his $10.6 billion public equity holdings.
At the top of Ackman’s list is Hilton Worldwide, the largest hotelier globally. He initially invested in the company in 2016, but it wasn’t until 2018 that he established a significant position. Ackman attributes Hilton’s success to its extensive network of brands and properties, which creates a strong competitive advantage. The company’s loyalty program has grown exponentially, from 80 million members in 2018 to over 195 million today. This network effect has driven revenue growth, with management expecting a 2-3% increase in revenue per available room.
Ackman’s second-largest position is Alphabet, the parent company of Google. He invested in the company in 2023, capitalizing on the AI boom. Alphabet’s strong operating results, particularly in its Google Cloud business, have driven earnings growth. The company’s investment in AI has led to increased engagement and satisfaction with search results, resulting in an expanding operating margin. With a forward P/E ratio of around 20 and expected earnings growth above 20% for the next five years, Alphabet appears to be an attractive investment opportunity.
Rounding out Ackman’s top three is Chipotle Mexican Grill, which he initially invested in 2016 following a food safety crisis. Although he has sold a significant portion of his initial stake, Chipotle remains one of Pershing Square’s largest holdings. Ackman attributes the company’s success to its strong brand, differentiated product, and substantial scale. With same-store sales increasing 11% in its most recent quarter and a long-term vision of opening 7,000 locations, Chipotle’s growth prospects appear promising. However, with shares trading at 44 times earnings estimates for next year, investors may want to exercise caution before investing.
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