Bill Ackman is much more of a value investor than many of his peers, and his portfolio reflects that.
Bill Ackman is one of the most well-known billionaire investors and is the head of the Pershing Square hedge fund. However, unlike many of his billionaire peers in the industry, Ackman is a value investor at heart and primarily invests in easy-to-understand businesses at a perceived discount, as opposed to trying to put his money in the next big thing.
According to Pershing's latest U.S. Securities and Exchange Commission (SEC) filings, there are only seven different stocks in the portfolio, and only one of them is a technology stock. In fact, Ackman's three largest non-tech positions make up about 50% of the portfolio's entire market value. Here's what they are and why Ackman might be so confident in them.
1. Chipotle
Pershing Square's largest non-technology investment is Chipotle Mexican Grill (CMG 0.61%). The hedge fund owns about $1.9 billion worth of the fast-casual chain's stock, and it has been a big winner for Ackman and his team. Pershing paid about $436 per share for its Chipotle stock. By the end of 2023, it had a gain of about 425%.
Chipotle, which recently announced a 50-to-1 stock split, is trading near all-time highs, and it isn't hard to see why. Not only is Chipotle a highly profitable business with a 12.5% net margin (high for a restaurant operator), but it is still growing fast, with annualized revenue growth of more than 18% over the past three years.
Despite its stellar performance, there could be plenty of room to grow. Chipotle currently operates about 3,400 restaurants (mostly in the United States) and plans to double the U.S. store count over time. The company will also focus on international expansion. It sees potential for a total of 10,000 locations, which seem rather reasonable given that it would still have roughly one-fourth of the stores of McDonald's (NYSE: MCD).
2. Restaurant Brands International
Restaurant Brands International (QSR -0.74%) is the parent company of Burger King, Tim Hortons, Popeyes, and Firehouse Subs. It accounts for 17.6% of Pershing Square's stock portfolio, and the $1.8 billion investment represents a 7.4% stake in the restaurant operator.
The company's business model mainly consists of selling franchising rights to owner/operators, and there are more than 30,000 franchised locations among its four brands. It has a highly profitable business model, with a net margin of nearly 25%, and has grown its revenue at a 12.4% annualized rate over the past three years. It's also a solid dividend stock, with a 3.1% yield at the current share price. With the company investing heavily in reinvigorating the Burger King brand, there could be significant growth potential in the years to come.
3. Hilton
Hotel operator Hilton (HLT 0.39%) makes up about 16.2% of Pershing Square's portfolio and is the newest of the three positions on the list. Ackman has been investing in Hilton since late 2018 (the other two were started in 2016 and 2014, respectively), and the stock has roughly doubled since that time.
Not only has Hilton's business performed well, with revenue up 80% over the past two years, but the company continues to expand its global footprint and reinvest in its properties. Its iconic brand and scale give it a big competitive advantage, and with travel demand having been surprisingly resilient despite inflation, now could be a good time to add some exposure to your portfolio.
Should you take a closer look?
To be sure, I'd never suggest buying a particular stock just because a billionaire did. But these are three highly profitable and well-run businesses with significant growth potential in the years to come. If you're looking for some non-tech exposure in your portfolio, they could be worth a closer look.
Matt Frankel has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Chipotle Mexican Grill. The Motley Fool recommends Restaurant Brands International. The Motley Fool has a disclosure policy.
