Hedge fund operator Bill Ackman likes to make big bets. His Pershing Square Capital Management fund has $10.4 billion in assets under management and it is concentrated in just nine positions.

These are no fly-by-night operations either. Almost all are large-cap or mega-cap stocks. Its smallest holding is Howard Hughes Holdings (NYSE:HHH), a mid-cap stock worth $3.7 billion. The reason Ackman pursues these market giants is he believes there is opportunity in their companies because of the role giant institutional investors are playing in their performance.

In his June 2024 shareholder letter, Ackman explained these “permanent owners” allow active investors to take advantage of the price volatility created by “short-term, highly leveraged investors” consuming a large percentage of a stock’s float. When even the smallest earnings misses “drive business valuations to levels well below long-term intrinsic value,” Pershing Square can pounce and benefit from the opportunity.

Since its inception in 2004, the hedge fund has had a cumulative return of 1,933%, or a compound annual return of 15.7%, compared to a 630% return, or 10.1% CAGR by the S&P 500.

Ackman’s three largest holdings are worth $5.5 billion and represent over half of Pershing Capital’s holdings.

Key Points About This Article:

• Bill Ackman has enjoyed a long, successful career and his Pershing Square Capital Management hedge fund has handily outperformed the broad market index for over 20 years.
• He likes to make big bets on stocks to capitalize on pricing opportunities, and he concentrates his holdings in just nine companies.
• If you’re looking for some stocks with huge potential, make sure to grab a free copy of our brand-new “The Next NVIDIA” report. It features a software stock we’re confident has 10X potential.

Hilton Worldwide Holdings (HLT)

The largest position in the hedge fund is hotel operator Hilton Worldwide Holdings (NYSE:HLT), even though he has been selling shares over the past few quarters. From its peak of 10.3 million shares, Pershing Square now owns 8.95 million shares valued at $1.95 billion. It represents 18.8% of his portfolio. Ackman’s average buy price is just under $87 per share, giving him a 146% return so far.

Hilton has a global luxury brand presence with 24 world-class brands comprising nearly 7,800 properties. Its fast-growing 195 million member Hilton Honors loyalty program is an important part of the hotelier’s growth as they are highly engaged and account for two-thirds of all room nights booked.

Hilton launched a mid-tier brand last year called Spark by Hilton that seeks to access the premium economy market; opened an extended stay chain, LivSmart Studios; and has made several acquisitions to give it extended reach.

The hotel chain is experiencing rising revenue per available room (revPAR) with total revenue up 12% in the first half of 2024 to $5.5 billion. With Hilton benefiting from the ongoing growth in the travel and tourism markets, expect HLT stock to continue growing.

Chipotle Mexican Grill (CMG)

Chipotle Mexican Grill (NYSE: CMG) was previously Ackman’s biggest holding until he sold off 22% of the stock he owned, or 8.4 million shares, in the second quarter. He now owns 28.8 million shares valued at $1.8 billion, or 40% fewer shares than he held a year ago. Chipotle represents 17.3% of Pershing Square’s portfolio. Still, with an average buy price of just $8.82 per share, Ackman is sitting on a better than 511% gain.

It’s noteworthy that Ackman’s transactions occurred before Chipotle’s massive 50-for-1 stock split and its CEO jumped ship for Starbucks (NASDAQ:SBUX). He was able to lock in profits before the Mexican food chain saw its stock tumble 23% from its all-time high.

Yet the fact he continues to make Chipotle such a large part of his portfolio indicates he still sees plenty of growth on the horizon. It wouldn’t be surprising if Ackman views the restaurant’s depressed stock as one of those opportunities where shares were driven below their long-term intrinsic value.

Restaurant Brands International (QSR)

Ackman’s third largest position is another restaurant operator, Restaurant Brands International (NYSE:QSR), the owner of Burger King, Popeyes Louisiana Kitchen, Tim Hortons, and Firehouse Subs.

While Ackman’s ownership position in RBI has remained largely unchanged at around 23 million shares or so, he did pick up an additional 381,000 shares in the second quarter. That brings his holdings total to 23.5 million shares, which are valued at $1.76 billion, good for a 16.7% position in Pershing Square’s portfolio.

Restaurant Brands International is betting big on being able to turnaround its Burger King franchise, which has been the weakest link in the company. Earlier this year, it acquired Carroll’s Restaurant Group, previously the largest franchisee of Burger King restaurants. It also acquired Popeyes China at the end of June. It plans to refranchise most of the Carroll’s restaurants and is looking for a new partner for the China chain.

With so many moving parts to RBI, the stock is down 12% in 2024. Yet it has brought on former Domino’s (NYSE:DPZ) CEO Patrick Doyle to serve as chairman and lend his expertise. It was Doyle who changed the pizza shop’s direction and turned it into the powerhouse it is today. Restaurant Brands International is hoping he can work the same magic at the burger joint.

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