Bill Ackman - Perishing Square Capital Management Portfolio

Bill Ackman - Perishing Square Capital Management Q 4 2023 Portfolio

Perishing Square Capital Management, a hedge fund managed by Bill Ackman, disclosed 8 security holdings in their SEC 13F filing for the fourth quarter of 2023, with a total portfolio value of $10,494,117,169

 

Portfolio Overview

 

Chipotle Mexican Grill Inc. (CMG) – 18.15% of the portfolio

 

Recent Activity: Reduced 13.49%

Shares: 824,998

Reported Price: $2286.96

Value: $1,886,737,000

Current Price: $2621.05

 

Restaurant Brands International (QSR)17.55% of the portfolio

 

Recent Activity: No change reported

Shares: 23,348,135

Reported Price: $78.13

Value: $1,824,190,000

Current Price: $76.49

 

Hilton Worldwide Holdings (HLT)16.08% of the portfolio

 

Recent Activity: Reduced 10.91%

Shares: 9,181,180

Reported Price: $182.09

Value: $1,671,801,000

Current Price: $192.76

 

Howard Hughes Holdings Inc. (HHH) – 15.51% of the portfolio

 

Recent Activity: Added 12.17%

Shares: 18,852,064

Reported Price: $85.55

Value: $1,612,794,000

Current Price: $76.28

 

Alphabet Inc. CL C (GOOG) – 12.71% of the portfolio

 

Recent Activity: No change reported

Shares: 9,377,195

Reported Price: $140.93

Value: $1,321,528,000

Current Price: $147.11

 

Canadian Pacific Kansas City (CP) – 11.48% of the portfolio

 

Recent Activity: No change reported

Shares: 15,095,528

Reported Price: $79.06

Value: $1,193,452,000

Current Price: $84.73

 

Alphabet Inc. (GOOGL) – 5.85% of the portfolio

 

Recent Activity: No change reported

Shares: 4,354,824

Reported Price: $139.69

Value: $608,325,000

Current Price: $145.88

 

Lowe’s Companies Inc. (LOW) – 2.67% of the portfolio

 

Recent Activity: Reduced 82.37%

Shares: 1,245,515

Reported Price: $222.55

Value: $277,189,000

Current Price: $226.91

 

Top Holdings:

Chipotle Mexican Grill Inc. (CMG)

 

CMG remains the largest holding at 18.15% of the portfolio despite a 13.49% reduction in shares. The increase of 14.61% in its current price over the reported price suggests significant performance improvement, which could have provided an opportune time to take profits.

 

Restaurant Brands International (QSR)

 

This holding represents 17.55% of the portfolio. The slight decline in the current price from the reported price might suggest market challenges or headwinds for the fast-food industry, but the size of the holding indicates a long-term confidence in the company.

 

Hilton Worldwide Holdings (HLT)

 

Occupying 16.08% of the portfolio with a reduction of 10.91% in shares, the rise in the current price shows the strength in the hospitality sector, possibly reflecting a rebound in travel and tourism that Ackman expects to continue.

 

Howard Hughes Holdings Inc. (HHH)

 

At 15.51% and with an added 12.17% in shares, the decrease in the current price against the reported price could suggest a market undervaluation that Ackman is capitalizing on, indicating a bullish outlook on real estate development.

 

Alphabet Inc. CL C (GOOG)

 

Alphabet comprises 12.71% of the portfolio. The increase in the current price from the reported price by 4.39% reflects a positive view on the tech giant’s growth prospects despite broader market volatility.


Canadian Pacific Kansas City (CP)

 

CP represents 11.48% of the portfolio. The rise in the current price by 7.17% suggests that Ackman is optimistic about the railroad industry, possibly due to its essential role in the economy and potential efficiency gains.

 

Alphabet Inc. (GOOGL)

 

Holding 5.85% of the portfolio, the similar performance to GOOG indicates consistency in Ackman’s confidence in Alphabet’s business model and future prospects.


Lowe’s Companies Inc. (LOW)

 

Lowe’s constitutes 2.67% of the portfolio after a significant reduction of 82.37% in shares. The current price has increased slightly by 1.96%, which may have been a factor in the decision to reduce the position, potentially realizing gains or reallocating capital to other opportunities.

 

Portfolio Insights:

 

Ackman’s portfolio suggests a focus on well-established companies with strong market positions. The reductions in CMG and HLT could be a part of taking profits from strong performers, while the increase in HHH shares might be an example of doubling down on investments Ackman expects to appreciate. His investments in Alphabet show a belief in the long-term growth of leading technology firms, and the inclusion of CP indicates an interest in infrastructure and transport.

 

Conclusion:

 

Bill Ackman’s Q4 2023 portfolio reflects a balance between profit-taking from successful investments and strategic additions to positions where he sees long-term value. The focus on a few high-conviction bets is typical of Ackman’s investment philosophy, which often involves deep research and a strong belief in the fundamentals of the companies he invests in.

Analyzing Chipotle Mexican Grill Inc. (CMG): Why is Bill Ackman investing in CMG ?

Analyzing Chipotle Mexican Grill, Inc. (CMG) from Bill Ackman’s investment perspective requires understanding his investment style. Ackman is known for his activist investing approach, often taking significant stakes in companies he believes are undervalued or could benefit from strategic shifts. He typically looks for companies with strong brands, solid market positions, and potential for improvement in operations and profitability.

 

Ackman’s investment in Chipotle Mexican Grill, Inc. (CMG) could be seen as a strategic move aligning with his reputation for selecting companies with solid fundamentals and growth potential. Here’s a breakdown of CMG’s key financial metrics and ratios that might support such an investment decision:

 

Market Capitalization and Growth:

 

CMG has experienced robust market capitalization growth, with a significant uptick in the trailing twelve months (TTM). The company’s revenue growth is also impressive, indicating a solid expansion strategy. Ackman would likely consider these factors as indicative of a strong market position and brand.

 

CMG’s market cap has seen a notable rise, reaching $71.25 billion, signaling strong market confidence.

The year-over-year market cap growth stands at 63.18%, highlighting rapid expansion and investor interest.

Revenue Streams:

 

Revenue has grown consistently, with a 14.33% increase in the TTM, indicating an upward trajectory in sales.

Profitability Margins:

 

CMG’s profit margins and ROIC are substantial, showcasing efficient operations and effective capital allocation. Ackman would view these as positive indicators of a company that is not only growing top-line revenue but is also translating that into bottom-line returns.

 

Gross Margin: CMG maintains a healthy gross margin of 26.20%, which is substantial for the restaurant industry.

Operating Margin: An operating margin of 15.78% demonstrates CMG’s ability to translate sales into profits effectively.

Profit Margin: With a net profit margin of 12.45%, the company shows strong bottom-line earnings relative to its revenue.

 

Valuation Ratios:

 

Despite a high PE ratio, which suggests the stock is not cheap, Ackman may look beyond the immediate earnings to the future growth prospects of CMG. The PEG ratio, while above 2, suggests growth expectations are factored into the stock’s price, but Ackman may still see potential if he believes in the company’s ability to exceed these expectations.

 

PE Ratio: At 58.60, the PE ratio is high, which may be justified by future growth expectations.

P/FCF Ratio: The price to free cash flow ratio of 58.27 suggests investors are willing to pay a premium for CMG’s cash-generating ability.

EV/EBITDA: An EV/EBITDA ratio of 38.14 reflects a higher valuation but is often typical for growth-oriented companies.

 

Debt Management:

 

The debt to equity ratio and other debt measures indicate leverage, but not excessively so, given the company’s cash flow strength. Ackman would likely analyze the cost of debt, interest coverage, and the terms of the debt to ensure there is no undue financial risk.

 

Debt to Equity Ratio: Standing at 1.32, it indicates a balanced approach to financing with a manageable level of debt.

Debt to EBITDA: A ratio of 2.09 shows CMG can cover its debt with earnings before interest, taxes, depreciation, and amortization. 

 

Operational Efficiency:

 

With high inventory turnover and asset turnover ratios, CMG is demonstrating efficient use of resources. Ackman may view this as an opportunity to further optimize operations, a strategy often employed by activist investors.

 

Asset Turnover Ratio: At 1.29, CMG efficiently uses its assets to generate revenue.

Return on Equity (ROE): A high ROE of 43.90% suggests that the company is using its equity effectively to generate profits.

Return on Assets (ROA): An ROA of 16.10% indicates that CMG is generating satisfactory earnings from its asset base.

Cash Flow and Liquidity:

 

CMG has a strong free cash flow, which is a crucial metric for Ackman. This financial flexibility allows for various capital allocation strategies, such as reinvestment in the business, share buybacks, or other shareholder value-enhancing initiatives.

 

Free Cash Flow: CMG generated $1.22 billion in free cash flow, offering financial flexibility for strategic moves.

Current Ratio: A current ratio of 1.57 shows that CMG has more than enough liquid assets to cover short-term liabilities.

Stock Performance:

 

The stock price increase of 60.27% over the last year reflects strong performance and positive market sentiment.

The buyback yield of 1.25% indicates CMG’s commitment to returning value to shareholders through share repurchases.

 

Stock Performance and Shareholder Returns:

The stock has seen a significant increase over the last year. While this might deter value investors looking for underpriced opportunities, Ackman might interpret this momentum as a sign of the market recognizing CMG’s value proposition. Additionally, the buyback yield suggests a shareholder-friendly management team.

 

Lack of Dividends:

CMG does not pay a dividend, which may be suitable for Ackman’s approach if he believes capital can be better used for growth or share repurchases.

 

Bill Ackman’s Potential Strategy:

If Ackman is investing in CMG, he might see a company that is already performing well but has the potential to do even better. He may identify operational efficiencies, propose new growth strategies, or push for more aggressive share repurchase programs. Given CMG’s strong fundamentals, Ackman could also view it as a resilient investment in an industry subject to trends and changing consumer preferences.

 

In summary, Ackman’s investment in Chipotle is likely be driven by the company’s strong brand, growth potential, solid financials, and opportunities for operational improvements. The high valuation metrics might be justified by the company’s expansion trajectory and consistent execution, aligning with Ackman’s philosophy of investing in quality businesses at reasonable prices.

Who is Bill Ackman ?

May 11, 1966:

  • William Albert Ackman was born in Chappaqua, New York.

1988: 

  • Ackman graduates from Harvard University with a degree in economics.

1989: 

  • Ackman joins Goldman Sachs as an investment banker.

1992:

  • Ackman leaves Goldman Sachs to start his own hedge fund, Gotham Partners, with $3 million in capital.

2002: 

  • Gotham Partners loses 40% of its value due to a bad bet on the telecom industry.

2003:

  • Ackman launches Pershing Square Capital Management, a hedge fund management company based in New York City.

2007:

  • Ackman becomes widely known for his high-profile battle with the management of Target Corporation. He acquires a stake in the company and pushes for changes to maximize shareholder value.

2008:

  • During the financial crisis, Ackman bets against the bond insurers MBIA and Ambac, predicting their downfall. This bet ultimately proves successful, earning Ackman’s fund billions of dollars in profits.

2011:

  • Ackman takes a significant stake in J.C. Penney and becomes its largest shareholder. He attempts to implement major changes in the company’s strategy and leadership, but his efforts fail, resulting in substantial losses for his fund.

2014:

  • Ackman becomes involved in a highly publicized short-selling campaign against Herbalife, a multi-level marketing company. He accuses Herbalife of being a pyramid scheme and places a billion-dollar bet against the company’s stock.

2017:

  • Ackman exits his short position on Herbalife, admitting that the campaign was not as successful as he initially anticipated. The bet resulted in significant losses for his fund.

2020:

  • Ackman gains attention for his early warning about the severity of the COVID-19 pandemic. In a series of interviews, he expresses his concerns about the virus and calls for a nationwide shutdown.

2020:

  • Pershing Square Capital Management launches a special purpose acquisition company (SPAC) called Pershing Square Tontine Holdings (PSTH). The SPAC raises $4 billion, making it the largest-ever IPO of a SPAC at the time.

2021:

  • PSTH fails to complete a merger deal within its two-year deadline, resulting in the dissolution of the SPAC. Ackman announces plans to launch a new SPAC in the future.

2022:

  • Ackman advocates for Universal Music Group (UMG), a division of Vivendi, to go public. Pershing Square Tontine Holdings II (PSTH II), Ackman’s new SPAC, agrees to merge with UMG, valuing the music label at around $40 billion.

2023:

  • The merger between PSTH II and Universal Music Group is completed, and UMG starts trading on the Amsterdam Euronext stock exchange.

Interesting facts

Ackman is known for his activist investing approach, often taking significant stakes in companies and pushing for changes to increase shareholder value.

He has been involved in several high-profile battles with company management and has made large bets on both long and short positions.

Ackman is a prominent philanthropist. In 2016, he signed the Giving Pledge, committing to donate the majority of his wealth to charitable causes.

He is a well-known advocate for education reform and has supported various organizations focused on improving public schools.

Ackman has a background in real estate and initially worked at his father’s company before venturing into the world of finance.

 

Bill Ackman - Perishing Square Capital Management 2023 Q3 Portfolio

Perishing Square Capital Management, a hedge fund managed by Bill Ackman, disclosed 8 security holdings in their SEC 13F filing for the third quarter of 2023, with a total portfolio value of $10,494,117,169

 

Top 4 Holdings

As of September 30, 2023, Ackman‘s top 4 holdings were:

 

1.             Chipotle Mexican Grill Inc. (CMG): Represents 16.65% of the portfolio.

2.             Restaurant Brands International (QSR): Accounts for 14.82% of the portfolio.

3.             Hilton Worldwide Holdings (HLT): Comprises 14.75% of the portfolio. There was a recent addition of 10.42% to this holding.

4.             Lowe’s Cos. (LOW): Makes up 14% of the portfolio. Recently, there was a reduction of 5.39% in this holding.

Company Analysis

To understand why Bill Ackman may have chosen these investments, let’s delve into each company:

 

Chipotle Mexican Grill Inc. (CMG): Chipotle is a leader in the fast-casual dining sector, known for its commitment to fresh, high-quality ingredients and customizable meals. Investing in CMG might be driven by the company’s strong brand, consistent performance, and potential for growth in the fast-casual dining market.

 

Restaurant Brands International (QSR): This is a multinational fast-food holding company, owning brands like Burger King, Popeyes, and Tim Hortons. Ackman’s investment here could be based on the company’s global presence, diverse brand portfolio, and potential for expansion, especially in emerging markets.

 

Hilton Worldwide Holdings (HLT): A major player in the hospitality industry, Hilton owns and manages a wide portfolio of hotels and resorts. The investment in HLT could be attributed to the potential for growth in the global tourism and business travel sectors, as well as the company’s strong brand recognition.

 

Lowe’s Cos. (LOW): Lowe’s, a home improvement retailer, has a significant presence in the U.S. and Canada. Ackman’s interest in Lowe’s might be due to the steady demand in the home improvement sector, driven by both DIY enthusiasts and professional contractors, and the company’s competitive position relative to its peers.

PORTFOLIO HISTORY CHART