Pershing Square Capital’s famed hedge fund manager, Bill Ackman, is one of the most interesting investors to keep tabs on. Not just because he’s a fantastic investor with a track record to show for it but also because he’s an incredibly bold investor with a concentrated portfolio.
At any given time, Pershing Square likely has enough holdings that one can count on two hands. As you’d imagine, a smaller pool of stocks means that the manager behind the fund can give each one of the businesses more attention.
Though not every Bill Ackman new buy will be a grand slam home run, I do think it’s worth checking in with what the man is up to. He’s a value investor who’s been known to make contrarian moves that pay off a great deal over the long run. In this piece, we’ll look at two of his newest bets that I think are ripe with deep value.
Canadian alternative asset manager Brookfield Corp. (NYSE:BN) and Nike (NYSE:NKE) are two recent Pershing Square purchases that stand out as intriguing value pick-ups. But which, if either, is a smart bet at current levels? Let’s find out.
Key Points About This Article
- BN and NKE are new Bill Ackman bets that could prove wise.
- Both names could work out really well for Ackman.
- 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.
Brookfield Corp.
Bill Ackman isn’t afraid to venture north of the border into Canada for value. Brookfield Corp. — BN shares, not to be confused with Brookfield Asset Management (NYSE:BAM) — represent Ackman’s latest Canadian bet, and it’s one that’s incredibly interesting. The company owns a great deal of real assets that generate ample cash.
Though the stock’s beta is rather high (at 1.75), which entails greater market risk, it is worth noting that alternative cash-producing assets can be rather defensive in nature. We’re talking about the types of businesses that pull in the cash in times of prosperity and economic contraction. Whether we’re talking offshore wind projects, data centers, or infrastructure vital to cities, Brookfield is all about building tangible assets that pull in cash regardless of the economic climate.
This begs the question: is Ackman looking for an economic downturn? Or a prolonged period of stagnant stock market gains? We’ll have to ask Ackman himself for the answer. Either way, the Brookfield bet looks incredibly well-timed as the company seeks to expand into some pretty lucrative areas, most notably renewables and data centers.
Further, the stock looks dirt-cheap at just over 12 times forward price-to-earnings (P/E) — such a great company for such a low price point. No wonder Ackman bought shares earlier in the year!
Nike
Nike seems like a more risk-on bet for Ackman. After all, sneakers and sports goods don’t exactly sell incredibly well when times are tough, and there are not as many consumers buying discretionary goods. Either way, a risk-on, deep-value kind of play like Nike seems to balance well with a prudent alternative asset manager like Brookfield.
In recent years, Nike has been hurting badly, with shares still down close to 54% from their 2021 highs. Despite the woes and lack of clarity regarding a turnaround plan, Nike remains a severely depressed play with a company and brand that’s arguably still wonderful. Only time will tell if Ackman’s latest NKE stock bet pays off. Given his vast understanding of the business (he made money in the name before), I’d side with Ackman, even as skeptics pass on the stock.
At 22.3 times trailing P/E, you’re paying a very fair multiple for a legendary American company. Only time will tell if new CEO Elliott Hill can help Nike run higher; I do think the company has many levers it can pull to propel demand for its goods. If Hill’s team can do something bold, maybe Nike has the ground to run higher. In any case, I consider the name a longer-term bet for investors with enough patience to let Mr. Hill work his magic.
Either way, I consider BN stock to be the safer of the two latest Bill Ackman buys. Though there may be deeper value to be had in Nike, the company is moving through a highly uncertain and unfavorable environment. As such, I’m unsure whether NKE will be a slam dunk.
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