Bill Ackman (Trades, Portfolio) has revealed his portfolio for the third quarter of 2021. The quarter saw Ackman sell out of his Agilent Technologies Inc. (A, Financial) holding and make additions to his Chipotle Mexican Grill Inc. (CMG, Financial), Domino’s Pizza Inc. (DPZ, Financial), Lowe’s Companies Inc. (LOW, Financial) and Hilton Worldwide Holdings Inc. (HLT, Financial) positions.
The guru's New York-based hedge fund takes large positions in underperforming companies with the intent of pushing management to make changes. This activist strategy allows the hedge fund to unlock value for shareholders.
Portfolio overview
At the end of the quarter, the guru’s portfolio contained six stocks with no new holdings. It was valued at $9.46 billion and has seen a turnover rate of 2%. The top holdings in the portfolio are Lowe’s, Chipotle, Hilton, Restaurant Brands International Inc. (QSR, Financial) and The Howard Hughes Corp. (HHC, Financial).
The sectors represented in the portfolio are consumer cyclical (87.36%) and real estate (12.64%).
Agilent Technologies
The quarter saw Ackman cut ties with his second-largest holding Agilent Technologies (A, Financial). The guru sold the remaining 11.69 million shares after a year of small reductions. Throughout the quarter, the shares traded at an average price of $161.83. Overall, the sale had a -16.14% impact on the equity portfolio and GuruFocus estimates the total gain of the holding at 101.30%.
Originally spun out of Hewlett-Packard in 1999, Agilent has evolved into a leading life sciences and diagnostics company. Today, Agilent's measurement technologies serve a broad base of customers with its three operating segments: life science and applied tools (45% of fiscal 2020 sales), cross lab (36% of sales consisting of consumables and services related to its life science and applied tools) and diagnostics and genomics (20%). Just over half of its sales are generated from the biopharmaceutical, chemical and energy end markets, but it also supports clinical lab, environmental, forensics, food, academic and government-related organizations. The company is geographically diverse, with operations in the U.S. (33%) and China (20%) representing the largest country concentrations.
On Nov. 16, the stock was trading at $161.88 per share with a market cap of $49.14 billion. According to the GF Value Line, the stock is trading at a significantly overvalued rating.
GuruFocus gives the company a financial strength rating of 6 out of 10, a profitability rank of 8 out of 10 and a valuation rank of 2 out of 10. There is one severe warning sign issued for assets growing faster than revenue. The company’s cash-to-debt ratio of 0.5 ranks it worse than 74.70% of industry competitors and is approaching a 10-year low.
Other top guru shareholders in Agilent Technologies (A, Financial) include Primecap Management, the Vanguard Health Care Fund (Trades, Portfolio), Pioneer Investments, the Parnassus Endeavor Fund (Trades, Portfolio) and Jerome Dodson (Trades, Portfolio).
Chipotle
For the first time since 2016, the guru made an addition to his Chipotle (CMG, Financial) holding. The purchase of 28,589 shares grew the holding by 2.63%. The shares traded at an average price of $1,816.70 per share during the quarter. GuruFocus estimates the total gain of the holding at 167.11% and the purchase had a 0.55% impact on the equity portfolio.
Chipotle Mexican Grill is the largest fast-casual chain restaurant in the United States, with systemwide sales of $7.2 billion over the last 12 months. The Mexican concept is entirely company-owned, with a footprint of nearly 2,900 stores at the end of the third quarter of 2021 heavily indexed to the United States, though the firm maintains a small presence in Canada, the U.K., France and Germany. Chipotle sells burritos, burrito bowls, tacos, quesadillas and beverages, with a selling proposition built around competitive prices, high-quality food sourcing, speed of service and convenience. The company generates its revenue entirely from restaurant sales and delivery fees.
As of Nov. 16, the stock was trading at $1,838.67 per share with a market cap of $51.77 billion. The stock is trading at a significantly overvalued rating according to the GF Value Line.
GuruFocus gives the company a financial strength rating of 6 out of 10, a profitability rank of 8 out of 10 and a valuation rank of 1 out of 10. There are three severe warning signs issued for assets growing faster than revenue, a declining gross margin and a declining operating margin. Despite the warning signs, the company’s operating margin exceeds 84.13% of the restaurant industry and supports the strong profitability rank.
Spiros Segalas (Trades, Portfolio), Ray Dalio (Trades, Portfolio), Pioneer Investments, Jim Simons (Trades, Portfolio)' Renaissance Technologies and Paul Tudor Jones (Trades, Portfolio) also maintain shares in Chipotle (CMG, Financial).
Domino’s
Ackman also added 2.6% to his Domino’s (DPZ, Financial) position with the purchase of 53,032 shares. The shares traded at an average price of $505.95 per share throughout the quarter and GuruFocus estimates the total gain of the holding at 41.14%. Overall, the sale had a 0.27% impact on the equity portfolio.
Domino's Pizza is a restaurant operator and franchisor with more than 18,350 stores across 93 countries. The firm generates revenue through the sales of pizza, wings, salads and sandwiches at company-owned stores. Royalty and marketing contributions from franchise-operated stores and its network of 26 dough manufacturing and supply chain facilities also contribute to overall revenue. With roughly $16 billion in 2020 system sales, Domino's is the largest player in the global pizza market, ahead of Pizza Hut, Papa John's and Little Caesars.
The stock was trading at $523.82 per share with a market cap of $19.13 billion on Nov. 16. A modestly overvalued rating is given to the company by the GF Value Line.
GuruFocus gives the company a financial strength rating of 3 out of 10, a profitability rank of 9 out of 10 and a valuation rank of 2 out of 10. There are two severe warning signs issued for a declining operating margin and poor financial strength. The company’s weighted average cost of capital is easily supported by the return on invested capital, indicating strong capital efficiency.
Domino’s (DPZ, Financial) shares are also owned by Simons' firm, Ken Fisher (Trades, Portfolio), Pioneer Investments, Paul Tudor Jones (Trades, Portfolio) and Ray Dalio (Trades, Portfolio).
Lowe’s
The guru’s Lowe’s (LOW, Financial) holding saw a small 0.95% addition with the purchase of 95,951 shares. The shares traded at an average price of $199.34 throughout the quarter. Overall, the purchase had a 0.21% impact on the equity portfolio and GuruFocus estimates the total gain of the holding at 99.42%.
Lowe's is the second-largest home improvement retailer in the world, operating about 1,970 stores throughout the United States and Canada. The stores offer products and services for home decorating, maintenance, repair and remodeling. Lowe's targets retail do-it-yourself and do-it-for-me customers as well as commercial business clients.
On Nov. 16, the stock was trading at $245.54 per share with a market cap of $169.96 billion. According to the GF Value Line, the stock is trading at a significantly overvalued rating.
GuruFocus gives the company a financial strength rating of 5 out of 10, a profitability rank of 8 out of 10 and a valuation rank of 2 out of 10. There is one severe warning sign issued for a declining gross margin. The company’s cash flows were consistent throughout the last decade and saw a spike this year amidst increased demand for building supplies.
Other top guru shareholders in Lowe’s (LOW, Financial) include Barrow, Hanley, Mewhinney & Strauss, Pioneer Investments, Tom Gayner (Trades, Portfolio), Elfun Trusts (Trades, Portfolio) and Ray Dalio (Trades, Portfolio).
Hilton
Rounding out Ackman’s top trades is an addition to his Hilton (HLT, Financial) holding. The guru purchased 125,307 shares to boost the holding by 0.98%. Throughout the quarter, the shares traded at an average price of $126.37. GuruFocus estimates the total gain of the holding at 76.14% and the purchase had a 0.17% impact on the equity portfolio overall.
Hilton Worldwide Holdings operates 1.02 million rooms across its 18 brands, addressing the midscale through luxury segments. Hampton and Hilton are the two largest brands by total room count at 28% and 21%, respectively, as of Dec. 31, 2020. Recent brands launched over the last few years include Home2, Curio, Canopy, Tru and Tempo. Managed and franchised represent the vast majority of adjusted Ebitda, predominantly from the Americas regions.
As of Nov. 16, the stock was trading at $141.97 per share with a market cap of $39.62 billion. The stock is trading at a significantly overvalued rating according to the GF Value Line.
GuruFocus gives the company a financial strength rating of 3 out of 10 and a profitability rank of 6 out of 10. There are five severe warning signs issued, including declining revenue per share and poor financial strength. The company’s revenue and net income took a massive hit in 2020 as the pandemic almost eliminated travel.
Bill Nygren (Trades, Portfolio), Pioneer Investments, Primecap Management, Jeremy Grantham (Trades, Portfolio) and Jerome Dodson (Trades, Portfolio) also own Hilton (HLT, Financial) shares.
