William ‘Bill’ Ackman is a US billionaire hedge fund manager who runs Pershing Square Capital Management. UK investors can invest in this fund via Pershing Square Holdings (LSE: PSH), which is a FTSE 100 investment trust.
The fund has doubled the S&P 500 returns over the last five years, serving up an annualised 28% return. This has helped put it back among the world’s 20 top-performing hedge funds.
In five years, the Pershing Square share price has risen around 222%. That’s more than any other current FTSE 100 stock over the same period, according to my data provider.
An incredibly concentrated portfolio
As a quick reminder, a hedge fund is an investment vehicle that pools capital from investors. While it can use a diverse range of strategies to generate returns, Pershing Square is ‘long-only’ on stocks nowadays, meaning Ackman doesn’t ‘short’ (or bet against) individual shares.
That said, the fund still uses leverage and derivatives, which can result in aggressive macro bets against specific asset classes. These can turbocharge returns and offset losses during falling markets, but also add more risk than a traditional fund.
Today, the portfolio contains just eight stocks. Like Warren Buffett, who has nearly 50% of Berkshire Hathaway‘s stock portfolio in just Apple, Ackman believes in doubling down on his best ideas.
Here are those stocks, as of November:
| Portfolio weighting | |
| Chipotle Mexican Grill | 16.5% |
| Restaurant Brands International | 14.8% |
| Hilton Worldwide Holdings | 14.7% |
| Lowe’s Companies | 14.0% |
| Howard Hughes Holdings | 11.9% |
| Alphabet Class C | 11.8% |
| Canadian Pacific Kansas City Limited | 10.6% |
| Alphabet Class A | 5.4% |
The difference between Alphabet A and C shares is the former come with voting rights. If we count those together, then the fund holds just seven different listed companies!
AI and consumer brands
Looking at the portfolio, two things stand out. The first is that the manager is bullish on restaurant stocks. Chipotle Mexican Grill and Restaurant Brands (owner of Burger King) make up just over 31% of the holdings.
Meanwhile, Alphabet’s total portfolio weighting of roughly 17% means it’s the largest holding in a single company.
Ackman scooped up the shares in early 2023 while the market was worried that generative artificial intelligence (AI) could disrupt Google’s search business. He said Alphabet “will be a dominant player in AI for the very, very long term.”
While recognising the risks of generative AI, I agree, and therefore don’t mind increasing my exposure to Alphabet through the trust.
A potential bargain
Admittedly, Ackman’s ultra-high-conviction investing style isn’t for everyone. Yet to my mind, he remains one of Wall Street’s sharpest minds. And he wants his long-term investing record to stack up against Warren Buffett’s average annual return of 20%.
While that’ll be a tall order, Pershing’s returns have been incredible recently. Indeed, the fund has now generated around $12.3bn in returns over the last three years. Or approximately two-thirds of all gains since its inception in 2004! It thrives on volatility.
I invested at £30 a share in September and the stock has since gone up 23% to £37. However, the shares are still trading at a 30% discount to net asset value (NAV). So there could still be a potential bargain here.
If Pershing matches Buffett’s long-term record, I’ll be a happy shareholder!
