Bill Ackman, the prominent investor behind Pershing Square Capital, is known for his focused approach to investing, typically selecting just a handful of companies at a time. His strategy revolves around identifying high-quality businesses whose stocks he believes are undervalued compared to their true worth. Once invested, Ackman leverages his position as a major shareholder to influence company management and unlock hidden value, aiming to drive long-term growth and returns for his fund.
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Achman’s three stocks investment strategy
Ackman’s activist investing strategy demands a concentrated portfolio, as he needs to acquire significant stakes in companies to effectively influence management. With limited attention to spread across multiple holdings, his approach leads to a focused investment strategy.
As a result, more than 45% of Pershing Square’s $13.4 billion portfolio is concentrated in just three companies, which represent the core of his current investments. These three stocks are as follows, as reported by The Motley Fool.
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Alphabet (16.5%)
Ackman invested around $2.2 billion in Alphabet which is Google’s parent company, believing that concerns about artificial intelligence (AI) threatening Google Search were overstated. While some thought AI chatbots like ChatGPT could replace Google, the company has successfully integrated AI into its search results, boosting engagement and user satisfaction.
Innovations like AI-powered Google Lens and Circle to Search are driving growth, particularly in shopping and product discovery. Alphabet’s Google Cloud also saw strong revenue growth, up 35% last quarter, thanks to AI services. Despite some challenges, Alphabet’s stock remains attractively priced for long-term growth.
Brookfield (14.4%)
The billionaire began investing in the Canadian alternative asset management company in the second quarter and increased his position significantly in the third quarter. He holds around $1.9 billion in shares. Brookfield owns businesses in sectors like infrastructure, renewable energy, real estate, and insurance, and has a track record of making moves to unlock value.
For example, in 2020, it made Brookfield Renewable more accessible to institutional investors by changing its structure. It also spun off its asset management business, which will now be eligible for inclusion in U.S. stock indexes, potentially attracting more investment.
Brookfield expects strong cash flow growth in the coming years, and its stock has risen over 40% since Ackman’s purchase. Despite this, the stock is still considered undervalued, trading at just over 15 times earnings, with potential for higher valuation.
Hilton (14%)
Ackman initially invested in Hilton in 2016 but sold after the stock price quickly rose. He returned to Hilton in 2018 and took advantage of the COVID-19 sell-off to increase his position in 2020. Despite selling 18% of his shares last quarter, he still holds around $1.9 billion in Hilton stock. His investment thesis centres on Hilton’s growing network of properties and its strong brand, which creates a competitive advantage.
Since 2019, Hilton’s properties have grown by 36%, and its loyalty program, Hilton Honors, now has over 200 million members. While Hilton’s stock has reached a high valuation, Ackman’s continued investment suggests he is optimistic about the company’s long-term growth. However, with the stock’s current price, investors may want to consider other opportunities.
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#Bill #Ackman #bets #Billion #hedge #funds #stocks