A spokesperson for Pershing Square Capital, the hedge fund run by famed activist investor Bill Ackman, stated on Friday that it has no plans to sell its shares of Chipotle Mexican Grill (CMG +1.62%), according to Reuters. Pershing further affirmed that it intends to keep the fast-casual chain as a long-term holding, and that Chipotle remains one of its biggest positions.
Chipotle has seen a significant drop in its market value as the broader indices have given up ground during the COVID-19 epidemic. "CMG" shares have lost 13.5% year-to-date, against a retracement of 8% in the S&P 500 index.
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A meaningful vote of confidence
Pershing Square's statement will perhaps soothe investors anxious over the fund's commitment. Chipotle's near-doubling in 2019 was instrumental in propelling Pershing's 58% return last year. Recently, the hedge fund trimmed its stake by 1.2 percentage points, to 4.2% of total shares outstanding.
Ackman explained to Reuters in late February that Chipotle's gains had made it an outsize part of the fund's holdings, exceeding 20% of its capital. Thus, Pershing has slightly reduced its Chipotle exposure within the process of rebalancing its portfolio.
In another sign that Ackman sees further upside to Chipotle and other recent investments, the investor revealed last week that rather than reduce holdings on big bets, Pershing is initiating hedging activities to protect its portfolio, which is currently valued at $6.6 billion.
Such portfolio insurance may be a stop-gap protective measure in the recent market turmoil, or it may evolve into a sustained hedging project. At this juncture, it's anyone's guess as to the ultimate length and severity of the COVID-19 epidemic, much less its impact on consumer-facing stocks like Chipotle. But for now, Pershing Square is holding tight to its most successful investment over the past several quarters.
