Bill Ackman (Trades, Portfolio), leader of Pershing Square Capital Management, disclosed this week that his firm's top trades during the first quarter included a new position in Domino's Pizza Inc. (DPZ, Financial), a boost to its holding in The Howard Hughes Corp. (HHC, Financial), the closure of its position in Starbucks Corp. (SBUX, Financial) and reductions to its stakes in Chipotle Mexican Grill Inc. (CMG, Financial), Lowe's Companies Inc. (LOW, Financial) and Restaurant Brands International Inc. (QSR, Financial).
The New York-based firm takes positions in undervalued companies and pushes for changes so that the market can realize the value of the said companies. Pershing Square sells the stake when the company reaches the appraised value.
As of March 31, Pershing Square's $10.46 billion equity portfolio contains seven stocks, with one new position and a turnover ratio of 9%. The portfolio has a 73.41% weight in consumer cyclical, a 14.35% weight in health care and a 12.25% weight in real estate.
Domino's Pizza
During the quarter, Pershing Square purchased 2,035,704 shares of Domino's Pizza (DPZ, Financial), allocating 7.16% of its equity portfolio to the stake. The firm tacked on another 3,466 shares on Monday according to GuruFocus Real-Time Picks, a Premium feature.
GuruFocus ranks the Ann Arbor, Michigan-based pizza chain's profitability 9 out of 10 on several positive investing signs, which include a high Piotroski F-score of 7 and profit margins outperforming more than 92% of global competitors.
Other gurus with holdings in Domino's Pizza include Jim Simons (Trades, Portfolio)' Renaissance Technologies and Ken Fisher (Trades, Portfolio)'s Fisher Investments.
While shares of Domino's Pizza averaged $369.29 during the first quarter, shares traded around $427.29 on Monday and $437.08 on Tuesday. The stock is fairly valued based on Tuesday's price-to-GF Value ratio of 1.07.
Howard Hughes
The firm added 2.552 million shares of Howard Hughes (HHC, Financial), expanding the position 23.37% and the equity portfolio 2.32%. Shares averaged $92.44 during the first quarter; the stock is significantly overvalued based on Tuesday's price-to-GF Value ratio of 1.76.
GuruFocus ranks the Texas-based real estate company's financial strength 3 out of 10 on several warning signs, which include a weak Altman Z-score of 0.89 and debt ratios underperforming over 66% of global competitors.
Starbucks
Pershing Square sold 10,070,042 shares of Starbucks (SBUX, Financial), discarding 10.77% of its equity portfolio. Shares averaged $105 during the first quarter; the stock is significantly overvalued based on Tuesday's price-to-GF Value ratio of 1.33.
GuruFocus ranks the Seattle-based coffee chain's profitability 8 out of 10 on the back of profit margins and three-year revenue growth rates outperforming over 80% of global competitors despite three-year earnings growth rates underperforming more than 65% of global restaurant companies.
Based on GuruFocus estimates, Pershing Square gained approximately 40.09% on the stock since initially buying shares during the fourth quarter of 2018.
Firm also trims stakes in Chipotle, Lowe's and Restaurant Brands International
Pershing Square also made small reductions in its Chipotle (CMG, Financial), Lowe's (LOW, Financial) and Restaurant Rands International (QSR, Financial) holdings. The firm sold 75,096 shares of Chipotle, reducing the position by 6.47%, and 429,272 shares of Lowe's, trimming the position 3.47%. Chipotle shares averaged $1,447.50 during the first quarter, while Lowe's shares averaged $171.69 each.
The firm also sold 1,111,875 shares of Restaurant Brands International (QSR, Financial), reducing the position by 4.44%. Shares averaged $61.93 during the first quarter.
Disclosure: No positions.
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