Bill Ackman is one of the best-known hedge fund managers around.
The billionaire manager of Pershing Square Capital Management is an active poster on X (formerly Twitter) and he makes media appearances more than most of his hedge fund manager peers. He's been in the news for his activism at Harvard, but he's best known for his investments. In fact, at one time in his career, he was even dubbed "Baby Buffett."
Ackman has made a number of high-profile investment bets, including shorting Herbalife, which failed, but he also made billions betting that the S&P 500 would fall as the coronavirus pandemic hit.
Today, Pershing Square has $10.5 billion invested in just seven stocks. Let's take a look at each of the stocks in the portfolio, what they say about Ackman's investing style, and whether they are worth buying today.
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1. Alphabet
Alphabet (GOOG 9.96%) (GOOGL 10.22%) is now Ackman's biggest holding, making up 16.7% of the Pershing Square portfolio, across both classes of the stock. It's the newest holding in Pershing Square's portfolio as it was added in the first quarter of 2023.
Ackman has explained that he sees the data the company generates from search and related products as giving it a competitive advantage in the era of artificial intelligence (AI). So far, the bet has paid off as Alphabet has outperformed the S&P 500, and the company also brushed off concerns (so far) that search would be disrupted by chatbots like ChatGPT.
2. Chipotle Mexican Grill
Chipotle Mexican Grill (CMG 2.41%), the popular fast-casual Tex-Mex restaurant chain, is Ackman's second-biggest holding. Pershing Square has held the stock since the third quarter of 2016, making it its third-longest-held stock. Ackman currently owns $1.75 billion worth of Chipotle, and that investment has paid off handsomely as the stock is up 451% since Sept. 30, 2016.
At the time of the initial purchase, Chipotle was still struggling with the fallout from its E. coli outbreak in 2015, making the move something of a contrarian bet. Ackman said he believed Chipotle was fixable, and he helped install Brian Niccol as CEO of the chain, who is credited with driving the turnaround.
3. Howard Hughes
Ackman's third-biggest holding is Howard Hughes (HHH 1.05%), a diversified real estate holding company whose properties include multifamily residential, hospitality, and seaports. He's also chairman of the company.
Howard Hughes is Ackman's longest-held stock; he owned it as early as the fourth quarter of 2010, as a result of its spinoff from General Growth Properties. He's hiked his stake in the company recently. Currently, Pershing Square owns $1.57 billion of Howard Hughes, and it makes up 14.5% of the fund's portfolio. Since the company was spun off from General Growth, it's up 114%, underperforming the S&P 500.
4. Restaurant Brands International
Restaurant Brands International (QSR 1.03%) is another top holding of Ackman's, making up 14.4% of his portfolio. Between this investment and Chipotle, over 30% of Pershing Square's money is in restaurant stocks.
Restaurant Brands International is the owner of Burger King, Tim Hortons, and Popeyes Louisiana Kitchen, and Ackman helped engineer the merger that combined Tim Hortons and Burger King. The company bought Popeyes later. Restaurant Brands International has underperformed the S&P 500 slightly since it started trading in 2014.
5. Hilton Worldwide
Another consumer stock is No. 5 on Ackman's list. That's Hilton Worldwide (HLT -0.89%), one of the largest hotel operators in the world, which makes up 14.3% of the Pershing Square portfolio. Ackman started buying the stock in the fourth quarter of 2018 and bought nearly 1 million more shares in the third quarter. Like the other consumer stocks on this list, Ackman seems to like it because it's a simple, predictable business that generates cash and has pricing power.
Hilton has outperformed the S&P 500 since the end of 2018, gaining 161% versus the S&P's gain of 94%.
6. Lowe's
Home improvement retailer Lowe's (LOW -0.04%) also fits into Ackman's approach to consumer stocks as it operates in a duopoly with Home Depot. As of the end of the third quarter, Pershing Square owns $1.47 billion of Lowe's stock, making up 13.6% of the portfolio.
Pershing Square started buying Lowe's in the second quarter of 2018, and Lowe's stock has increased 120% since then compared to a 79% return for the S&P 500.
Part of Ackman's thesis is that Lowe's should be able to narrow its gap with Home Depot, and Lowe's has outperformed Home Depot since his initial purchase as well.
7. Canadian Pacific Kansas City
Canadian Pacific Kansas City (CP -0.50%), a railroad, is the last stock in Ackman's portfolio, and it's unique on the list as the only representative from the industrial sector. Pershing Square first bought CPKC in the fourth quarter of 2021, and it now makes up 10.4% of its portfolio. Canadian Pacific avoided the bear market and has narrowly beaten the S&P 500 since the end of 2021.
Ackman had owned CPKC shares back in the 2010s, and he said it was a mistake that Pershing Square sold the stock the first time around. Like other railroad stocks, Canadian Pacific enjoys wide operating margins.
Three stocks for your buy list
Most of these stocks have outperformed the market while Ackman has owned them, but three stocks in his portfolio stand out from the rest. Those are Alphabet, Chipotle, and Canadian Pacific, each of which has a strong competitive advantage.
Alphabet's products like search and YouTube essentially have monopolies in their respective industries and generate bumper profits.
Chipotle has dominated fast-casual dining for nearly a generation, and it's learned to excel at the digital channel, giving it a superior profit margin and a brighter growth opportunity.
Canadian Pacific generates operating margins in the 40% range and is the only transnational railroad linking Canada, the U.S., and Mexico, following its acquisition of Kansas City Southern.
If you're looking to follow Ackman's lead, starting with one of those three stocks makes the most sense.
