Bill Ackman, a big player in the activist investing world, currently holds a portfolio valued at nearly $11 billion. He is known for his trademark style where he takes large stakes in companies with the aim of turning them profitable. This is often considered a risky technique, but Ackman is known as one of the best. Currently, Bill Ackman’s portfolio is based on 7 holdings that we will go through.
The biggest sector that Ackman is now investing in is consumer staples, with Chipotle and Restaurant Brands International as the biggest holdings. He is also a big investor in Hilton Hotels and the Canadian Pacific Kansas railroad.
Not a lot of investors prefer his investment approach since it can result in major losses. Still, Ackman and his fund Pershing Square Capital managed to produce steady returns. In his career, he had both big wins but also losses, and we will go through them, and learn how his investment strategy works.
Bill Ackman’s Current Portfolio Holdings
Bill Ackman founder and owner of Pershing Square Capital Management has a tightly concentrated portfolio. Usually, he invests in a couple of companies, in which he holds major shares. His current portfolio consists of 7 holdings.
- Chipotle Mexican Grill, Inc. (NYSE:CMG) with 20.74% of the portfolio
Ackman bought over 2.9 million Chipotle stocks back on two occasions during 2016 for $411.12 and $375.70 respectively. Since then he’s been slowly selling their shares on 14 more occasions, while he bought them once more. The value of stocks increased almost 5 times in this period, and his starting investment of $385 million raised to the current $2.18 billion.
This has been one of Ackman’s most rewarding investments, with a total gain of 467%. He is currently the single biggest owner of Chipotle stocks. Chipotle’s stock value increased during 2023 from $1,371.13 to 2,286.96 at the end of the year.
- Hilton Hotels Corporation (NYSE:HLT) with 17.8% of the portfolio
Bill Ackman in Q4 2018 bought a massive 10.9 million shares of this hotel giant. In this holding, he invested $860 million, and he currently owns 4.02% of outstanding Hilton stocks. When he bought the majority of the shares they were valued at $72.24 and their price constantly increased. His last investment in this holding cost him $151.04 per share, while they are currently valued at $182.39.
This investment proved to be another hit for Ackman’s portfolio since his current share is valued at $1.88 billion. Since its first investment, this holding brought him a gain of 118%.
- Restaurant Brands International Inc (NYSE:QSR) with 16.8% of the portfolio
This Canadian-American fast food holding company is a long-time part of Ackman’s portfolio. He started investing in it back in Q4 2014 when he bought 38 million shares at $38.42. Since then he downsized this holding to 23.3 million shares, out of a total 314 million shares of this company.
His combined investment value was $958 million, while its current worth is an estimated $1.77 billion. Since he started investing in this brand, the stock price rose in different periods for two to three times the buying value. Their current value is $75.83.
- Lowe’s Companies Inc (NYSE:LOW) with 14.8% of the portfolio
This American company specializes in home improvement and has stayed a part of Ackman’s portfolio since Q3 2011. He quickly sold his share, but again invested in 2018. Since then the price of stocks continued to rise from $90.51 to $220.41.
His investment share in Lowe’s is $702 million, and it is currently valued at $1.56 billion. During 2023 he offloaded about 3 million shares since their price skyrocketed to a maximum of $224.82 For 13 years this holding has brought Ackman a return of 122%.
- Alphabet Inc Class C (NASDAQ:GOOG) with 12.8% of the portfolio
One of the newest members of Ackman’s portfolio is the owner of Google, Alphabet. He started trading it in 2023 when on two separate occasions he bought 9.38 million shares. He invested a total of $931 million, and during 2023 Alphabet stocks gained value, raising the worth of his share to $1.35 million. Just in 2023, Alphabet brought him 45% gains.
- Canadian Pacific Kansas City Ltd (TSE:CP) with 11.09% of the portfolio
This class I railroad has been a part of Ackman’s portfolio since Q3 2011. He currently owns 15.1 million shares which takes 1.63% of all the company’s outstanding shares. After the first time he bought their shares they were valued at $11.46, and he sold his entire share 5 years later at $29.46 and $29.89 respectively.
In Q4 2021 he again invested in the company, with this time the shares being valued at $73.05. His total investment into this company is reported at $1.13 billion, while their total value sits at $1.17 billion. This endeavor brought 3.1% gains, one of the current Ackman’s least lucrative holdings.
- Alphabet Inc Class A (NASDAQ:GOOGL) with 5.89% of the portfolio
Ackman simultaneously bought Alphabet Class A and C shares. These highly valued Class A shares take a significantly lower part of the portfolio when compared to the Class C. He invested in them $490 million, buying them at $95.94 and $129.36 respectively. Since then their price continued to rise, to a current value of $142.49 raising the value of this holding to $621 million. Ackman owns 4.35 million shares that generated a gain of 27% so far.
Bill Ackman’s Investment Philosophy
When we talk about Bill Ackman’s investment philosophy we must first turn to Benjamin Graham and Warren Buffett as his role models. Ackman several times noted that Graham’s book “The Intelligent Investor ” had a crucial influence on his view on investment, and his future perspective on his work.
But, like other value investors, he implemented his view of this strategy. His investment approach is to choose simple, predictable, and dominant companies. His logic is bulletproof – choosing companies that can make money on their own, that can create a steady and solid cash flow, and that are dominant in the field. It is difficult to find better companies to invest in than already developed ones that have a solid reputation.
Another condition that a company has to fulfill is to have enough capital to function and expand. This feature protects them from relying on debt or outside capital because, in the end, it dilutes the profits. This factor also shows that the business model of the company is good and that the demand for a product or service is viable.
Every business comes with its unique sets of risks, but another thing that Ackman wants to avoid is investing in companies with high exposure to extrinsic variables. He wants to be able to control as many factors as he can, and these variables are out of his reach.
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Also, as a part of the fundamental stability and value of the company he wants to see a good and capable management team. But, he doesn’t mind taking matters into his own hands.
He put a spin on a predictable value-investing strategy by adopting an activist approach. When he invests he invests big, and tries to get a solid amount of shares. He aims to have an opportunity to make decisions. If he sees opportunities to improve the company he likes to take direct action. But, in case he likes what the management is doing, that makes his job much easier.
From his portfolio, we can see that he likes not only to invest big, and into well-known companies but that he prefers a long-term investment horizon. So, what can we conclude? When he comes into a company, he buys a solid chunk of their shares, sees if he can help, and holds onto the investment. He likes big players who can make money on their own and be the leaders in innovations.
From all this, we can see that his approach cannot be characterized as a classic value investing approach. Since he buys into the best companies in the field, the margin of safety tactic used by the majority of value investors cannot be applied.
But, recently he vowed that he would make a drastic switch in his investment strategy. Ackman said that he will retire from his activist investor role and that he will no longer push companies to change. Will this be his lasting stance in the future?
Pershing Square Capital Management
Bill Ackman founded Pershing Square Capital Management in New York back in 2003. He started hard with strong activist campaigns against McDonald’s, Wendy’s, and Herbalife. During the next decade, they had several major investments that ended up with mixed results.
They went through several major losses, including Herbalife, J.C. Penny, and Valeant Pharmaceuticals. On the other hand, major wins like Chipotle Mexican Grill, and General Growth Properties brought billions to the investors.
In 2022 they invested $1.1 billion into Netflix. At that time Netflix had a gloomy prediction for their subscriber growth during 2022. During April their stock value went down by 35% which triggered PSCH to sell the whole holding, resulting in massive losses.
Bill Ackman’s Portfolio Performance
Pershing Square’s portfolio performance was nothing but impressive. In the last 5 years, the fund generated a 288% return managing to outperform the S&P 500 which in that period brought gains of 107%.
They had a bad spell in 2022 with a loss of 8.8%, but they gained in the previous three years 26.9%, 70.2%, and 58.1% respectively. He went from a 2022 loss to a 26.7% gain in 2023. The fund performed slightly better than the S&P 500 which generated 26.3% gains. The current best performers in his portfolio are Chipotle with a rise of 64%, Alphabet with 60%, and Hilton with 41%.
According to institutional investors and their estimates, Ackman personally made $600 million just during 2023 from his fund’s performance and managing fees.
Despite some missed investments Ackman managed to identify great investment opportunities. In most cases, he implemented both value investing and activist tactics to get the most out of his holdings.
Risk Management
Bill Ackman, although known for his often risky activist approach, pays great attention to risk management and mitigation. His first step in every investment is due diligence and deep analysis.
Due to his activist approach, he likes to take his time and analyze the company’s fundamentals. He is not looking only at stock value, but what the company can offer in the long term. Ackman doesn’t have a particularly favorite industry sector, but he rather picks investment candidates from their potential for long-term returns.
He takes into account lessons learned from Benjamin Graham and Warren Buffett and dives into details during company research. He digs deep into their financial reports, researches the competitive landscape, and compares the company with their main rivals. He looks to identify a potential for competitive advantage because with it it is much easier to capitalize in the future.
A regular practice in Pershing Square Capital Management is stress testing of the company before investment. They put the company into a series of scenarios, varying from pessimistic to optimistic, and check how it would fare. These results are crucial and with it, they work on devising potential contingency plans to nullify possible losses.
As a part of his risk management strategy, he pays a great deal on a company’s cash flow. Companies with a consistent cash flow already have a certain margin of safety which helps them to combat against potential market downturns and other external pressures.
One of the ways to fight off the risk is his unorthodox activist approach. He likes to take an important position on the board and oversee how the changes are implemented. He has a front-row seat in the company operations, and he usually has a say in future steps. While in position he can spot a possible issue early on and try to find a way to resolve it before it strikes.
Investment Success Stories
Ackman has several investment success stories, and we will today focus on his biggest wins, like General Growth Properties (NYSE:GGP), Chipotle Mexican Grill (NYSE:CMG), and Hilton Worldwide Holdings (NYSE:HLT).
General Growth Properties
Ackman’s arguably biggest win, General Growth Properties, the second-largest mall owner in the United States, was in deep trouble back in 2009. During the world economic crisis, they had $27 billion worth of debt cement shoes that were pulling them to the bottom. One of the backlashes of the crisis was the collapse of the commercial mortgage-backed securities sector.
GGP couldn’t finance their debt and they were almost written off. Then Ackam came and invested $60 million. He believed in the brand and the management and he was willing to commit to this investment. He partnered up with Brookfield Asset Management Inc. and Fairholme Capital Management LLC to save GGP from bankruptcy.
The sheer effort started to pay off, and in 2010 the company made a positive return. By 2013 the price of stocks rose by 60% compared to the value before the investment.
The major part of this success was Ackman’s activist approach where he implemented strategic changes. He sold all core assets that were not essential and couldn’t be saved. He renegotiated the debt and put the company on solid grounds. He sold his stakeholder share at the beginning of 2014 gaining $1.6 billion in returns, with a gain of 2667%.
Chipotle Mexican Grill
Ackman bought the majority of his Chipotle stakes back in 2016 during the brief but steep earning dip. At that moment the value of Chipotle varied between $375 and $440 per share. Since he bought a massive amount of shares he again resorted to implementing deeper changes. Ackman advocated for constant innovation, with a focus on customer service, menu innovation, and all-around operational improvement
Since then the price of stocks continued to rise, to the current $2.289,97. In 2022 Chipotle saw a total return in equity at a respectable 41%. So from today’s perspective, Ackman invested back in 2016 around $400 per share, and that has turned into almost $2.300 today. When we add up all the gains, that leads to almost 500% which is a spectacular result.
Hilton Worldwide Holdings
One of the largest Ackman’s holdings, the Hilton, takes 18% of his portfolio. He owns over 10 million shares from which he bought the majority in Q4 2018. When he decided to buy, the value of the share was $72.24 and by 2022 he generated roughly 86% total returns. The rise in value continued during 2023 due to an increase in the tourist sector after the COVID-19 pandemic.
Since he decided to invest, the value of Hilton shares more than doubled. From $72.24 to today’s $183.52 The returns further increased to the current 120% making this investment one of the top Ackman choices in recent years.
Notable Failures
Bill Ackman is known as one of the most successful investors in the last 50 years, but he wasn’t immune to mistakes and blunders. Some of the most notable failures are Herbalife and Valeant Pharmaceuticals.
Herbalife
His beef with Herbalife started in 2012. He characterized their business model as a pyramid scheme. In May 2012, he announced that his hedge fund had shorted Herbalife’s shares directly without derivatives resulting in their drop in value.
Another investor Carl Icahn challenged his claims and bought Herbalife shares himself. That caused Herbalife stocks to rise again. In 2014 Ackman invested $50 million on a public relations campaign against the company. Because of this series of actions Ackman was under scrutiny from Congress.
In March several news outlets reported that Ackman used tactics to undermine Herbalife’s stock value. He was accused of hiring people to spread false rumors about the company. After that, the value of companies’ stocks started to rise. By the end of this scandal, Ackman lost almost a billion dollars, while Herbalife’s shares continued to rise.
Valeant Pharmaceuticals
Ackman invested about $3.2 billion back in 2015. Then the stocks were valued at $190. After an initial success, he saw the rise in value to $260. Ackman secured himself a place on the board, replaced the chief executive, and brought new blood into the board of directors.
Ackman was one of the biggest supporters of the company, even after U.S. regulators investigated their pricing policies. Also, there were major issues with its specialty pharmacy unit, Philidor. After August 2015 stock value plummeted.
In the second part of 2015, Valeant stocks lost 16.6% in value, and the drop continued for another 10.2% during 2016. Ackman’s 18-month fight to save the company ended up with the stock’s value dropping down to a mere $10.93. The total loss of his investment is assessed at at least $3 billion.
Bill Ackman’s Outlook
Based on his recent interviews and statements he had shed some light on his thoughts about the close future and what he sees as potential issues.
His first and major concerts are regarding the adopted view of the soft landing of the American economy. He fears the landing will not be so soft, and that it can turn hard with prolonged inflation and even recession.
He anticipates that the Federal Reserve will rapidly move to interest rate cuts. He didn’t agree with the prediction of the majority of experts who said that these cuts can be prolonged. Ackman thinks that they will happen early in 2024 before the market expects it. These factors can have a major say in his position sizing decisions and investment choices.
Ackman predicts that companies from the health, consumer staples, and overall companies with a strong cash flow can benefit from interest rate cuts. He expressed his interest in AI and tech and has forecasted their rise in the future. He is even considering investing in those sectors for the long term.
Although he earlier specified that he was willing to try his activist approach in the healthcare and consumer goods sector, later he said that he would avoid and completely move away from this strategy in the future.
FAQs
What Is Bill Ackman’s Current Portfolio?
Currently, Bill Ackman’s portfolio is made of 7 holdings:
- Chipotle Mexican Grill — 20.7%
- Hilton Worldwide Holdings — 18.0%
- Restaurants Brands International — 16.8%
- Lowe’s Cos. Inc. — 14.6%
- Alphabet Inc. Class C — 12.8%
- Canadian Pacific Kansas City Limited — 11.1%
- Alphabet Inc. Class A — 5.9.
Where Does Bill Ackman Invest?
Although he focuses on companies that have a potential for high returns regardless of the sectors they work in, Ackman throughout his career did have sectors that he prefers. A solid share of his portfolio has taken the companies from healthcare, technology, and consumer staples.
In these sectors, he sees potential for long-term success, but he still diversifies his portfolio by investing in other sectors like the hotel industry and railroads.
Final Thoughts
Ackman is known as a controversial investor, and most of his investments are characterized as bold. He often chooses companies that no one believes in and gets a major stake in them. Then with his activist approach, he aims to maximize their performance and capitalize on the returns.
Throughout his career, he had ups and downs and frequently was at the center of media attention. But, it would not be an understatement to say that his fund is one of the best performing in decades. He is currently valued at over $4 billion, and he holds a tightly concentrated portfolio. Ackman announced a change in his approach, but what his next moves in these volatile times are, is rest to be seen.
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