Bill Ackman Predicts Massive Economic BOOM | These are the Stocks He Owns
Billionaire investor Bill Ackman runs one of the most closely followed stock market portfolios. In this video, we are going to talk about what stocks he owns and, who knows, you may just get an idea for your own portfolio. Let's jump into the video!
Before we get into what stocks Bill Ackman owns, it's important to take a second to better understand his investment strategy. This will help explain why he owns the stocks he does.
"What’s the checklist you kind of go through?"
"So we look for very high quality businesses," Ackman explains, "what we describe as simple predictable free cash flow generative dominant businesses. A business that Warren Buffett would describe as having a moat around it. Right? If you believe that the value of anything financial is the present value of the cash you can take out of it over its life, well, you need to know how much cash it’s going to generate over its life."
"So the business quality to us is the single most important criterion for determining what's interesting because if we can't predict the cash flows, we don't know what's worth. We don't know what's worth; we can't invest."
"So we figure out what it's worth, figure out how good the business is, how predictable will this cash flows be from a railroad or a spirits company or a real estate company, shopping mall business, and then we say, 'Okay, well where's it trading?' If there's a wide gap between price and value—you can buy for 50 cents it's worth a dollar twenty—well then we're going to take a hard look and try to understand why it trades at a deep discount."
"And once we understand the reasons, we decide, 'Well, these are things that we can solve. You know, can we, in light of the situation, the circumstances, be influential in changing these levers that can cause this valuation discrepancy to narrow?' And is this a business that while we're causing the valuation discrepancy to narrow, we can also perhaps contribute to the valuation growing?"
"And if those things are true, we found something that looks quite interesting for us."
Ackman sums up his investment strategy in this one sentence: "Buy simple, predictable, cash generative businesses for less than what those businesses are truly worth." If this sounds familiar, that is because his strategy is very similar to that of the legendary investor Warren Buffett. This makes sense, given the fact that Bill Ackman is a huge fan of Warren Buffett. Ackman even attended the Berkshire Hathaway annual meeting as early as the 1990s and even got the privilege of asking a couple of questions at the event.
The next thing you will notice about Bill Ackman’s portfolio is that there aren’t very many stocks in it. His portfolio is extremely concentrated, especially when you compare it to other investment managers who have upwards of 100 stocks in their portfolio at any given time.
So now that we better understand Ackman’s investment strategy, let's jump into his portfolio! But first, make sure to hit the like button because a ton of research goes into these videos, and the support really encourages me to keep making these videos for you guys. You guys are great!
The largest position in Bill Ackman’s portfolio is Lowe's, ticker symbol LOW. This position is worth 2 billion dollars and makes up over 18 percent of Ackman’s portfolio. Lowe's is a Fortune 50 company and is the world's second-largest home improvement retailer; its biggest competitor, Home Depot, is number one.
Lowe's stores offer a wide variety of products including lumber, paint, plumbing, electrical supplies, and tools—pretty much a one-stop shop for anything a suburban dad could ever need. The company operates three main divisions. The largest division is home decor, which includes things such as appliances, flooring, kitchen and bath, and paint. Home decor accounts for around 35 percent of sales.
Next up is building products, which includes products such as lumber, electrical, lighting, and plumbing. The building products division accounts for around 30 percent of sales. Its third division is hardlines, which includes hardware, lawn and garden, and outdoor tools. Hardlines accounts for around 30 percent of sales.
Lowe's had sales of 72 billion dollars and generated profits of 4.5 billion dollars in 2020. The stock currently trades at around 203 dollars a share and has a P/E ratio of 18.7.
The second largest position in Ackman’s portfolio is Agilent Technologies, ticker symbol A. This position is worth around 1.7 billion dollars and accounts for around 16 percent of the total portfolio. Don't feel bad if you don't know what this company does or have ever even heard of it; neither did I, and I am an investor for a living.
After a quick Google search, I found out that Agilent is a leading maker of scientific testing equipment. Agilent did 5.3 billion dollars in revenue in 2020 and had a profit of 885 million dollars. The stock currently trades around 170 dollars a share and has a P/E ratio of 47.2.
Next up in the portfolio is Chipotle, ticker symbol CMG. This stake is worth 1.6 billion dollars and makes up 15.7 percent of the portfolio. Chipotle is a popular American quick-casual restaurant chain, popular for its burritos, tacos, burrito bowls, and salads.
Chipotle is unique among large restaurant chains in America in that it doesn't franchise its locations; instead, the company owns all of its locations. Ackman's investment in Chipotle dates back to 2016 when he purchased a 9.9 percent stake in the company. When Ackman initially made this investment, Chipotle's stock price had suffered as the restaurant had a food safety issue that resulted in customers getting sick.
This investment may end up being one of Bill Ackman’s most successful investments of all time. The company was able to overcome its challenges, and the stock price has increased dramatically as a result. Bill Ackman was able to buy into the stock at around 400 at the end of 2016. Today, the stock is currently trading just shy of two thousand dollars a share. Put another way, the current share price is worth about 200 Chipotle steak burritos. Ackman's investment has had quite the impressive return over a less than five-year holding period.
Bill Ackman has taken advantage of the high share price by trimming his stake in the company. This year, he used to own 9.9 percent of the entire company, but that has been reduced to just shy of 4 percent. He remains one of the largest shareholders in Chipotle. Chipotle had revenue of six billion dollars and profits of 313 million dollars in 2020. The current market cap is nearly 54 billion dollars.
Hilton Worldwide Holdings, ticker symbol HLT, is the fourth largest position in the portfolio. The position is worth 1.5 billion dollars or roughly 14.3 percent of the total portfolio. Hilton Worldwide Holdings owns and manages hotels, resorts, and timeshare properties across the globe. If you need a bed for the night, Hilton has just a few hundred thousand of them.
Hilton Worldwide is one of the largest hotel chains, with a lodging empire that includes over 6,400 properties comprising about 1 million rooms in about 120 countries. Its brands include DoubleTree, Embassy Suites, Hampton Inn, and its flagship Hilton brand. Hilton checks all the boxes for what Ackman looks for in an investment.
Ackman said, "Hilton is a high-quality, asset-light, high-margin business with significant long-term growth potential led by a superb management team." Hilton had revenue of 4.3 billion dollars and lost 137 million dollars in 2020. Definitely a bad year when you consider that in 2019 the company did 9.5 billion dollars in revenue and over 1 billion dollars in profit.
Hilton has a market cap currently of 35 billion dollars and a current stock price of around dollars. Ackman owns 1.5 billion dollars of Restaurant Brands International stock, ticker symbol QSR, worth around 14 percent of his portfolio. Restaurant Brands International owns the brands Burger King, Tim Hortons, and Popeyes. Pershing Square has been an investor in QSR since 2012 when they invested through a merger into the holding company that was then taken public in connection with the acquisition of Burger King by 3G Capital.
3G Capital is the investment firm led by Brazilian billionaire Jorge Paulo Lemann. 3G Capital is well known for another deal it did as well; this deal was when they partnered with legendary investor Warren Buffett to purchase a large stake in the American food company Kraft Heinz. Since his original investment, Ackman added to a stake and now owns 7.5 percent of QSR. QSR, through its brands Burger King, Tim Hortons, and Popeyes, is a pure franchise company, meaning they collect a steady stream of royalties from independent operators who run the restaurants without having to spend large amounts of cash building and maintaining the restaurants.
Restaurant Brands had revenue of nearly five billion dollars and profits of 754 million dollars in 2020. The company has a market cap of 30 billion dollars, and the stock currently trades at around 64 dollars.
The sixth largest position in Ackman’s portfolio is Howard Hughes, ticker symbol HHC. Ackman owns 1.3 billion dollars of stock, representing 12 percent of his portfolio. Ackman's fund, Pershing Square, owns an astonishing nearly 25 percent of the company. This is by far the largest percent of a single company that Ackman owns.
The Howard Hughes Corporation develops real estate. The company manages master-planned communities, shopping malls, and mixed-use developments throughout the United States. For those of you who don't know, a master-planned community is kind of like a small, self-contained city in which a developer, such as Howard Hughes, builds the houses in an area that was previously just empty land.
This stake in Howard Hughes dates back more than a decade to 2010 when Ackman purchased shares as part of Howard Hughes' spinoff from the real estate investment trust General Growth Properties. While Ackman has been a shareholder in the company for more than a decade, the majority of the shares he owns were purchased in the last 18 months when the market was crashing in March, and Howard Hughes needed to raise money by selling 12 million shares. Ackman bought 10 million of them. Ackman is also chairman of Howard Hughes' board of directors.
Bill Ackman considers this investment a generational bet, and said, "We've owned it for 10 years, and it's likely we'd still own this 10 years from now." The company's growth strategy is focused on developing properties in areas that people are moving to, such as Las Vegas, Texas, and Hawaii. Howard Hughes had revenue of 700 million dollars and a loss of 10 million dollars in 2020. This is a sharp contrast to 2019 when revenue was 1.3 billion dollars and profit was 128 million dollars. The company has a current market cap of nearly 5 billion, and the stock trades for around 90 dollars a share.
The final position in the portfolio is Domino's, ticker symbol DPZ. Ackman’s position in Domino's is worth about 950 million dollars and accounts for just under nine percent of the total portfolio. Ackman owns about six percent of the entire company.
I did an entire video on this news when Ackman made this investment earlier this year; you can check that out here. Domino's is the largest pizza chain in America based on sales. The company operates a network of company-owned and franchise stores located throughout the United States and other countries. Of the 17,000 locations throughout the world, only 350 of them are owned directly by Domino's; the rest of those locations are franchised, with an independent operator owning the location and paying the company fees.
This position is the newest name in their portfolio, with Ackman announcing the investment in Domino's this past May. If you didn't notice already by looking at Ackman’s other positions, he is a huge fan of the restaurant industry, with holdings in Domino's, Chipotle, and Restaurant Brands International. He also used to have a large position in Starbucks, which he actually sold and used the cash from that sale to purchase this position in Domino's. Ackman took advantage of a momentary dip in Domino's stock price and started purchasing shares of the company around three hundred and thirty dollars a share. Domino shares are currently trading at five hundred and ten dollars a share.
The company had sales of 4.1 billion dollars and profit of nearly 500 million dollars in 2020. Domino's current market cap is nearly 19 billion dollars, and the stock currently trades at a P/E ratio of around 41.
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