It was a tough few years for investor Bill Ackman (Trades, Portfolio). But the Pershing Square founder got back on track, and then some, this year.
For the first seven months of 2019, Ackman posted gross performance of 46.0%, putting Pershing on course for its best year ever. Missteps into companies such as embattled Valeant Pharamaceuticals (BHC, Financial) had undermined performance in the previous four years, leading to losses and the firm’s worst year ever when it declined 20.5% in 2015.
Several elements led to Pershing’s turnaround. Ackman sold his remaining shares of Valeant (now Bausch Health Companies Inc.), at a nearly $4 billion loss, in the first quarter of 2017. At the beginning of 2018, the firm also “had taken significant steps to refocus its organization, and to address the subpar investment performance in previous years,” it said in a 2018 annual report.
Prior to the four-year streak, Ackman had generated mostly gains for the famed fund. He started with a 42.6% return in 2004, its first year of operation. He then posted above 40% returns twice more, in 2009 and 2014 as Valeant took off. His previous record includes only two years of losses – a 13% downturn in 2008 and 1.1% dip in 2011.
Year to date, Ackman’s best stock is Chipotle Mexican Grill Inc. (CMG, Financial), which soared 69.29%. The S&P 500 index closed the week up 20.65%.
Ackman’s portfolio listed only nine stocks with a value around $6.72 billion and no short positions as of June 30. His assets under management top $8.6 billion.
"I note that this excellent performance is due to strong earnings growth and positive developments across all of our portfolio companies," Pershing Chairman Anne Farlow said in the letter. "It would be impossible for every position in a large and diverse portfolio to outperform in a volatile market, but it can occur when an activist invests in a portfolio of 8-12 carefully selected companies."
Ackman’s best stocks
Chipotle Mexican Grill (CMG, Financial)
Ackman holds 1,782,710 shares of the fast-casual restaurant as of June 28, giving him a 6.72% stake. He has reduced the position in the previous two quarters and in the third quarter of 2018. He started investing in Chipotle in the third quarter of 2016 when the price averaged $411. His average purchase price of $397.66 against his average sell price of $498.51 gives him an estimated gain of 62.85% on the holding, according to GuruFocus estimates.
Hilton Worldwide Holdings Inc. (HLT, Financial)
Hilton Worldwide Holdings advanced 40.58% year to date. Ackman has 10,966,251 shares of the company, for a 3.72% stake. He started the position in the fourth quarter of 2018 and made a modest increase in the first quarter of 2019. Based on his average quarterly purchase price of $71.12, GuruFocus estimates his gain is around 39.49%.
Starbucks Corp. (SBUX, Financial)
Starbucks Corp. gained 37.44% year to date. Ackman holds 9,994,049 shares of the company, or 0.8% of shares outstanding. He started the position in the fourth quarter of 2018 and reduced it by 14.98% in the first quarter. Based on his average quarter purchase price of $62.79 and average sell price of $68.63, GuruFocus estimates his gain around 35.25%.
Restaurant Brands International Inc. (QSR, Financial)
Restaurant Brands International Inc. rose 36.79% year to date. Ackman has 18,342,703, or 7.29%, of his outstanding shares. He started the position back in the fourth quarter of 2014 and has been selling for the past five quarters. His average quarterly purchase price was $38, and his average sale price was $60.39, for an estimated gain of around 72.14%.
The Howard Hughes Corp. (HHC, Financial)
The Howard Hughes Corp. soared 32.97%. Ackman has 1,194,793 shares of the company, for a 2.77% stake. He started the position in the fourth quarter of 2010 and has sold shares in each of the past four quarters. His average quarterly purchase price of $65.73 and average quarterly sell price of $123.31 give him an estimated gain of around 90.23%.
Correction: This article previously listed Element Solutions (formerly Platform Specialty Products) as a stock in Ackman's portfolio. He exited that position in 2019.Ă‚
See Bill Ackman (Trades, Portfolio)’s portfolio here.
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