Bill Ackman is something of a legend in investment circles. He manages Pershing Square Capital Management, the hedge fund he founded, which manages nearly $11 billion in assets. The activist investor made his fortune by acquiring large positions in companies and pushing management to make positive changes that increase shareholder value.
What sets Ackman apart from his hedge fund colleagues is that Pershing Square has significant stakes in only eight to 12 companies and typically holds them for years. It focuses on large-cap, high-quality North American companies with limited downside risks and predictable, recurring cash flows. This strategy has been very successful for Ackman, as Pershing Square has generated an annualized return of 31% over the past five years, or approximately double the performance of S&P500.
Let’s take a look at the eight stocks that made up Pershing Square’s portfolio to close out 2023 and why Ackman chose them.
1. Chipotle: 22%
Chipotle Mexican Grill (NYSE:CMG) is by far Pershing’s largest holding, with approximately 825,000 shares worth more than $2.4 billion. Ackman first bought Chipotle stock in 2016 after the company experienced a series of food safety issues that caused the stock to lose half its value.
Ackman cited Chipotle’s “continued focus on exceptional food and operational excellence” for fueling the company’s impressive growth. In 2023, revenue grew 14%, resulting in diluted earnings per share (EPS) that climbed 38%. Ackman noted that Chipotle’s same-store sales jumped 8% and the 26% margin expansion fueled his confidence that Chipotle has a “long runway for robust growth.”
Additionally, Chipotle recently announced a 50-to-1 stock splitthe first in the company’s 30-year history.
2. Hilton: 17%
Pershing has a long-standing position in Hilton Worldwide Holdings (NYSE:HLT), totaling 9 million shares worth nearly $1.9 billion. Ackman invested in the hotel operator in late 2018, significantly increasing his stake at the height of the pandemic, betting that travel would eventually rebound. This gamble was largely rewarded.
Ackman called Hilton a “high-quality company… led by an exceptional management team.” In 2023, Hilton’s revenue grew 17%, while adjusted EPS jumped 27%. Ackman cited the company’s profit, noting that it was 59% higher than pre-COVID-19 levels, driven in part by average daily revenue per room that is 13% higher than in 2022. Ackman is also impressed by the company’s increasing market share.
3. Restaurant brands: 16%
Savvy investors will recognize the trend that is beginning to emerge: a continued bet on consumer resilience. Pershing Square owns more than 23 million shares of International restaurant brands (NYSE:QSR), in a stake worth $1.7 billion. The company owns iconic brands such as Burger King, Popeyes, Firehouse Subs and Tim Hortons. Ackman first invested in the restaurateur in 2012, before the company even went public, and then increased his stake…
