Bill Ackman has a concentrated portfolio based on what he believes are a handful of stocks capable of achieving alpha, excess returns of an investment relative to a benchmark index.
Bill Ackman, billionaire investor, founder and chief executive officer of Pershing Square, has an investment style similar to Carl Icahn in that he too has a contrarian “activist” investment style which at times has been controversial.
Bill Ackman has had his share of wins and losses.
“I’m incredibly focused. I’ve got something to prove,” said Bill Ackman
Bill Ackman’s moves are followed closely by portfolio managers around the world.
His recent acquisition was a controlling stake in Howard Hughes Holdings, a real estate development and management company based in The Woodlands, Texas.
Ackman’s hedge fund, Pershing Square Capital, already owns approximately 37% of the company’s outstanding shares.
Bill Ackman has a concentrated portfolio with the hedge fund’s $14.8 billion asset under management funnelled towards just three companies.
So Bill Ackman doesn’t have a diversification strategy with 43% of the fund’s assets placed on just three stocks.
What does Bill Ackman’s incredible focus see that others can’t?
“The wealth of the top one-tenth of 1% of the population is about equal to that of the bottom 90% of the population, which is the same sort of wealth gap that existed during the 1935-40 period”
BILL ACKMAN
Zeroing in on Bill Ackman has a concentrated portfolio play
Here are Bill Ackman’s trio stock plays;
Uber (15.6%)
Uber Technologies (NYSE: UBER) is the latest addition to Ackman’s Pershing Square portfolio
Bill Ackman is piling up the chips on UBER with a disclosed purchase of 30.3 million shares of the ride-sharing company amounting to approximately $2 billion investment, which he made last month in February.
In Bill Ackman’s recent shareholder presentation, he cited Uber’s network effect as the best reason for his bullish sentiment on the stock.
Indeed, Uber has a monopoly on ride-sharing networks outside of China. Moreover, it is leveraging that network of drivers and customers to build Uber Eats and a broader delivery service, accounting for half of its volume.
Bill Ackman believes the company’s dominant position shields it from the possible disruption of autonomous vehicles (AVs). Uber is propelling itself into a serious partner for AV companies looking to build a robo taxi service.
Bill Ackman believes Uber can aggregate demand and add on AV supply with human drivers.
He thinks Uber has high utilization rates for AV companies, and he adds that those companies with activities exclusively in autonomous vehicles will have most of their fleet not in use throughout the day.
But what if AV invades Uber’s space and not only taxi people on demand but also offers a home delivery service and a courier service?
AV could be disrupting technology for the entire road logistics transport sector.
“He thinks Uber has high utilization rates for AV companies, and he adds that those companies with activities exclusively in autonomous vehicles will have most of their fleet not in use throughout the day”
RAY DALIO
Bill Ackman has a concentrated portfolio of stocks in Alphabet
Approximately 13.8% of Bill Ackman’s portfolio is in Alphabet (NASDAQ: GOOG), representing his second largest stock holding.
Ackman piled heavily into GOOG in early 2023 amid (fears that generative artificial intelligence (AI) start-ups could disrupt its Search product.
GOOG climbed 40% when Ackman wrote his midyear update to Pershing Square shareholders in June.
Ackman still thinks the stock looks attractive.
His stake in Alphabet is now worth about $2 billion.
So, AI technology is benefiting GOOG and is not a headwind for the company.
Ackman noted that AI is helping to improve the search product and increase ad efficacy.
Google has been able to adopt AI technology and improve its products.
Google is also experiencing increased search engagement with products like Google Lens and Circle to Search, which often focus on high-value product and shopping searches.
Google Cloud, a suite of cloud computing services providing access to resources like data storage, networking, and machine learning running on Google’s infrastructure, is increasingly becoming an important revenue earner for Google.
Bill Ackman noted that 70% of generative AI start-up unicorns were Google Cloud customers in mid-2023.
AI startups are accelerating Google Cloud revenue growth.
Google Cloud operating margin increased to 14% last year, and there could still be more room for improvement based on rival margins.
Alphabet shares are trading for approximately less than 20 times forward earnings.
Ackman believes Alphabet still represents good value, with its growth remaining strong.
“Ackman’s Pershing Square Capital bought shares of Toronto-issued Brookfield Corp. (NYSE: BN), a Canadian-American multinational company, one of the largest alternative investment management companies in the world, with over US$900 billion of assets under management in 2023”
– Wealth Training Company
Bill Ackman has a concentrated portfolio with Brookfield Corp. (13.7%), making the trio, the third-largest holding
Ackman’s Pershing Square Capital bought shares of Toronto-issued Brookfield Corp. (NYSE: BN), a Canadian-American multinational company, one of the largest alternative investment management companies in the world, with over US$900 billion of assets under management in 2023.
Pershing Square’s 34.9 million shares are worth approximately $2 billion at the time of writing.
Brookfield Corp. has generated significant earnings growth and free cash flow, which it has been reinvesting in new opportunities and returning excess cash to shareholders. It increased its quarterly dividend to 13% earlier this month and holds $160 billion worth of capital to deploy into new investments.
Bill Ackman noted in his recent presentation that Brookfield’s 15x earnings multiple is a significant discount to its intrinsic value and a discount to similar asset management companies.
Indeed, management said its intrinsic value was $84 per share at its investor presentation last year, and it sees that climbing to $176 by 2029 based on a 15x multiple of distributable earnings.
Brookfield Corp distributable earnings of $3.96 per share last year increased 30%, year to date.
Growth also accelerated in the second half of the year.
Management is anticipating 25% growth per year through 2029.
The stock trades below the 15x multiple management estimates for its fair value. So, the stock could provide spectacular returns.
Bill Ackman’s decision to invest 13.7% of his portfolio is his vote of confidence in Brookfield Corp.
So Bill Ackman has a concentrated portfolio based on just three stocks, UBER, GOOG and BN, and if it is a case of doing what they do and not what they say, then Ackman’s trio could give investors a heads up.
