The FTSE 100‘s been surging in recent months but one stock that hasn’t joined the party is Pershing Square Holdings (LSE: PSH). Its shares have dropped 15.5% since June.
The investment trust, headed by William ‘Wild Bill’ Ackman, might have just crossed into bargain territory, as far as I’m concerned. Is this a time to be buying the dip? Let’s look into it.
By design
Investment funds and the fees they charge aren’t everyone’s cup of tea, but I think they’re worth exploring. They offer middle ground between individual stocks, with all the risk that goes with putting your money into one company, and broad index funds which, by design, guarantee average returns along with forcing you to invest in companies you may otherwise wish not to.
Funds also mean a team of experts scouting for stocks and doing the hard yards for us. That saves time and effort but it also unlocks investing in geographies or sectors I’ve no knowledge of. That’s providing I trust the team and their decisions of course.
And as far as funds go, Pershing’s a curious one. Ackman’s American and his team’s mostly American too, but US indexes have strict rules on the kind of payment structure he wants to use, hence the UK listing.
The current portfolio contains entirely US-listed companies too, albeit most with significant global reach. As a quick performance barometer, the fund’s tripled in value since its FTSE 100 debut in 2017.
Portfolio
Ackman’s style is high-conviction in just a few companies. At present, that’s a portfolio of just eight stocks, including Hilton (of hotels fame), Nike (sportswear), Alphabet (Google), Chipotle (the popular Mexican fast food chain), and Burger King and Tim Horton owners Restaurant Brands International. Given its focus on hospitality and restaurants across the pond, it’s hard to call this a diversified portfolio, although banking on Americans going to restaurants isn’t an unconvincing investment thesis.
The fund makes aggressive macro bets too from time to time, famously turning $27m into $2.6bn during the turbulent early Covid-19 months. Such plays sound terrific when they come off but add another layer of risk that might put off those looking for more stable places for their money.
And if I wanted to include this type of investment in my portfolio, I’m looking at shares 15% cheaper than a couple of months ago. Is that cheap? Well, on a net asset value (NAV) basis, which tells us the cost of the shares a fund owns, the NAV per share’s £49.16 in its 13 August update.
Pershing shares go for £36.54, as I write. That’s a 25.7% discount on net asset value and looks like a pretty good entry point to me. It’s for these reasons that I bought the share recently.
