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Holly LaFon
Holly LaFon
Articles (9594)  | Author's Website |

Bill Ackman Trounces S&P 500 in 1st Quarter

Ackman's concentrated portfolio nearly triples the index

Investor Bill Ackman (Trades, Portfolio) announced he is acing the index year to date with a portfolio dedicated entirely to long stocks.

According to documents from his hedge fund, Pershing Square Holdings, Ackman returned 37.2% excluding fees for the first three months of the year, and 36.9% after fees. Meanwhile, the S&P 500 clocked a 13.07% gain. Ackman’s numbers included a 6.3% gross gain and 6.2% net gain for March, versus a 1.79% rise in the index for the month.

The New York-based manager is celebrating a resurgence in his fund after several rocky years. It ended 2018 up 0.7% excluding fees, after declining 2.6% in 2017, 12.1% in 2016 and 19.3% in 2015. Much of Ackman’s decline in returns after gaining 50.6% in 2014 were credited to his outsized holding in Valeant Pharmaceuticals (now Bausch Health (NYSE:BHC)), a stock that plunged in 2015.

In addition to restructuring his firm to increase focus on investments rather than raising capital, Ackman in an annual letter attributed performance to a shift in strategy over the previous 18 months.

“First, we refocused our investment strategy on the core principles that have driven our profitability since the inception of Pershing Square,” Ackman wrote in March. “Our portfolio today represents the results of our strategy of investing in simple, predictable, free-cash-flow-generative businesses which are protected by large competitive moats. Today, we own one of the highest quality collections of businesses we have owned since the inception of Pershing Square.”

For 2019, Ackman saw gains across his concentrated portfolio of 10 positions. His best performer is his third largest holding, Chipotle Mexican Grill Inc. (NYSE:CMG). The fast-casual restaurant soared 63.23% year to date as it recovered from a spate of food-borne illnesses that weighed on its stock since 2016.

Ackman has held the stock since the third quarter of 2016 when its price averaged $411 and has watched it rise to $704 Wednesday. The holding occupied 14.07% of his reported portfolio as of Feb. 14.

Ackman’s largest holding, Restaurant Brands International Inc. (NYSE:QSR), ranked as his second-best performer, gaining 26.08% year to date. The company, which is home to restaurants such as Burger King and Tim Hortons, reached $65.77 per share Wednesday. Ackman started his position in the fourth quarter of 2014, when the price averaged $38.

Both of Ackman’s fourth-quarter purchases also added to his gains. Hilton Worldwide Holdings Inc. (NYSE:HLT) reached $86.52 per share Wednesday after rising 18.65% year to date. Its fourth-quarter share price averaged $72. Ackman made the holding 13.19% of his portfolio or his fourth-largest position.

Coffee chain Starbucks Corp. (NASDAQ:SBUX), Ackman’s fifth-largest position after starting it in the fourth quarter, rose 15.89% year to date. It traded around $74.63 per share Wednesday, up from its fourth-quarter average price of $63. The holding represented 12.71% of Ackman’s portfolio at fourth quarter end.

Ackman’s only position not in positive territory Wednesday was Element Solutions (NYSE:ESI), a chemicals company. Its shares declined 0.97% year to date to $10.41, but Ackman exited the stock this year on Feb. 3, when it traded around $12 per share. It was his second-largest holding at 7.01% of the portfolio.

In addition to his reported portfolio, Ackman also has a separate investment vehicle listing a stake in Automatic Data Processing (NASDAQ:ADP), which further boosted performance with a 24% rise year to date.

About the author:

Holly LaFon
I'm a financial journalist with a Master of Science in journalism from Medill at Northwestern University.

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