Pershing Square hedge fund manager Bill Ackman is a famous billionaire investor. Ackman, unlike many of his billionaire colleagues, is a value investor who invests in simple firms at a discount rather than trying to find the next great thing.
Pershing's recent SEC filings list only seven stocks, and only one is a technology stock. About 50% of Ackman's portfolio's market value comes from his three largest non-tech assets. Here's what they are and why Ackman may trust them.
1. Chipotle Chipotle Mexican Grill is Pershing Square's largest non-tech investment. The hedge fund holds $1.9 billion of the fast-casual chain's stock, which has been profitable for Ackman and his crew. Pershing bought Chipotle for $436 per share. By 2023, it had risen 425%.
It's easy to see why Chipotle, which just split its stock 50/50, is trading near record highs. As a restaurant operator with a 12.5% net margin, Chipotle is lucrative and growing fast, with annualized revenue growth of nearly 18% over the past three years.
Despite its success, it may have opportunity to develop. Chipotle has 3,400 locations, largely in the U.S., and intends to increase them. The company will also expand internationally. That it would still have one-fourth of McDonald's (NYSE: MCD) shops makes 10,000 sites appear plausible.
II. Restaurant Brands International Burger King, Tim Hortons, Popeyes, and Firehouse Subs are owned by Restaurant Brands International (NYSE: QSR). Pershing Square owns 17.6% of it, and the $1.8 billion investment gives them 7.4% of the restaurant operator.
The company sells franchising rights to owner/operators and has over 30,000 franchised stores across its four brands. This very profitable business strategy has a net margin of over 25% and has grown revenue 12.4% annually over the past three years. At its present share price, it yields 3.1%—a good dividend choice. With the corporation investing extensively in reviving Burger King, growth may be possible in the future.
3. Hilton Hotel Operator The youngest of Pershing Square's three assets, Hilton (NYSE: HLT) is 16.2% of its portfolio. Hilton has nearly doubled since Ackman began investing in it in late 2018 (the other two started in 2016 and 2014, respectively).
Hilton has grown 80% in revenue over the previous two years and continues to expand globally and invests in its properties. Its iconic name and scale offer it a competitive advantage, and travel demand has remained strong despite inflation, so now may be a good time to add exposure.
Should you investigate? In no way would I recommend a stock merely because a billionaire did. Three prosperous and well-run enterprises with tremendous growth potential in the future. If your portfolio needs non-tech exposure, they may be worth considering.