In this article, we discuss 7 best stocks to buy now according to Bill Ackman.
Bill Ackman is a billionaire American investor and hedge fund manager, known for his activist investment strategy. He founded his first investment firm, Gotham Partners, in 1992. Ackman made significant profits during the financial crisis of 2008 by selling credit default swaps against MBIA corporate debt on a significant profit. He founded Pershing Square in 2004, with a personal investment of $54 million.
Bill Ackman is known on Wall Street for his bold activist short selling techniques. His most famous activist campaigns have been with Canadian Pacific Railway Limited (NYSE:CP), Target Corporation (NYSE:TGT), Chipotle Mexican Grill, Inc. (NYSE:CMG), and Herbalife Nutrition Ltd. (NYSE:HLF).
At the end of March 2022, Pershing Square’s Bill Ackman said that he is changing his aggressive activist investment strategy, and instead of publicly ousting company flaws and malpractices, he will now focus on improving operations and delivering higher gains to shareholders.
“Pershing Square 3.0”
He calls the change in strategy “Pershing Square 3.0”and it was developed because the investor saw improved performance once he cut back on public fights and built larger stakes in top-quality companies. His quieter investment approach resulted in a 58% net return in 2019, a 70% net return in 2020, and a 26.9% return in 2021, exceeding the S&P 500 Index returns repeatedly. He told investors that this change in strategy is permanent, and he will no longer indulge in short selling, focusing instead on companies that require less operational amendments and generate substantial profits.
Some of the most notable stocks in Bill Ackman’s fourth quarter portfolio include Lowe’s Companies, Inc. (NYSE:LOW), Hilton Worldwide Holdings Inc. (NYSE:HLT), and Chipotle Mexican Grill, Inc. (NYSE:CMG), among others discussed in detail below.
Bill Ackman of Pershing Square
Our Methodology
We used the fourth quarter portfolio of Bill Ackman’s Pershing Square for this analysis, ranking the list according to the hedge fund’s stake value in each holding. Data from 900+ elite hedge funds tracked by Insider Monkey in Q4 2021 was used to identify the number of hedge funds that hold stakes in each firm.
Best Stocks to Buy Now According to Bill Ackman
7. Canadian Pacific Railway Limited (NYSE:CP)
Pershing Square’s Stake Value: $202,421,000
Percentage of Pershing Square’s 13F Portfolio: 1.87%
Number of Hedge Fund Holders: 55
Canadian Pacific Railway Limited (NYSE:CP) was incorporated in 1881 and is headquartered in Calgary, Canada. The company operates a transcontinental freight railway across Canada and the United States, carrying bulk commodities such as grain, coal, fertilizers, and merchandise freight. In mid-March, Canadian Pacific Railway Limited (NYSE:CP) halted operations amid a labor strike, which disrupted shipments of important commodities when prices were already soaring.
Securities filings reveal that Canadian Pacific Railway Limited (NYSE:CP) is a new acquisition of Bill Ackman’s Pershing Square as of the fourth quarter of 2021. The hedge fund purchased 2.8 million shares of Canadian Pacific Railway Limited (NYSE:CP) worth $202.4 million in Q4, representing 1.87% of the total 13F securities. The stock gained 4.1% as Ackman’s stake in the company was disclosed publicly. Between 2011 and 2016, Ackman ran a successful activist campaign at Canadian Pacific Railway Limited (NYSE:CP) and he recently reinvested as the stock went down for the first time since the investor exited his stake in 2016.
In 2021, Canadian Pacific Railway Limited (NYSE:CP)’s full-year revenue came in at $6.32 billion, compared to $6.05 billion in 2020. Net income also increased in 2021 to $2.25 billion from $1.92 billion in the previous year.
On January 27, Canadian Pacific Railway Limited (NYSE:CP) declared a C$0.19 per share quarterly dividend, in line with previous. The dividend is payable on April 25, to shareholders of record on March 25.
BofA analyst Ken Hoexter downgraded Canadian Pacific Railway Limited (NYSE:CP) on April 8 to Neutral from Buy with an $81 price target. He downgraded nine stocks in his Transportation coverage, citing worsening demand outlook and falling freight rates. The analyst told investors that Freight market signals have become “increasingly softer”, suggesting lower demand across the sector.
Chris Hohn’s TCI Fund Management is the biggest stakeholder of Canadian Pacific Railway Limited (NYSE:CP), with 55.8 million shares worth more than $4 billion. Overall, 55 hedge funds were bullish on the stock at the end of December 2021, up from 38 funds in the prior quarter.
In addition to Lowe’s Companies, Inc. (NYSE:LOW), Hilton Worldwide Holdings Inc. (NYSE:HLT), and Chipotle Mexican Grill, Inc. (NYSE:CMG), Canadian Pacific Railway Limited (NYSE:CP) is a notable stock to invest in according to Bill Ackman.
Here is what ClearBridge International Growth EAFE Strategy has to say about Canadian Pacific Railway Limited (NYSE:CP) in its Q3 2021 investor letter:
“The other major headwind to relative performance in the quarter was Canadian Pacific Railway Limited (NYSE:CP). The stock has been a strong performer for the Strategy but negative sentiment around its bidding war for U.S. rail operator Kansas City Southern has weighed on the stock since late May. As a result, the cyclical uptick we expected from the company has been masked by the takeover. Indeed, we have been frustrated by the muted performance among Canadian Pacific Railway Limited (NYSE:CP) and other recently added positions in our structural bucket of growth companies with more cyclical business models or that are undergoing a restructuring that should lead to a step change improvement in earnings. As more regions reopen from COVID-19 and spending rebounds, we expect better performance from our structural names, including Airbus and hospitality and food service provider Compass.”
6. Domino’s Pizza, Inc. (NYSE:DPZ)
Pershing Square’s Stake Value: $1,180,692,000
Percentage of Pershing Square’s 13F Portfolio: 10.95%
Number of Hedge Fund Holders: 31
Domino’s Pizza, Inc. (NYSE:DPZ) is an American multinational pizza company that operates worldwide via company-owned and franchised stores. In the fourth quarter of 2021, Bill Ackman’s Pershing Square owned more than 2 million shares of Domino’s Pizza, Inc. (NYSE:DPZ), worth $1.18 billion, representing 10.95% of the total Q4 holdings.
On March 1, Domino’s Pizza, Inc. (NYSE:DPZ) declared a $1.10 per share quarterly dividend, a 17% increase from its prior dividend of $0.94. The dividend was distributed on March 30, to shareholders of the company as of March 15.
Cowen analyst Andrew Charles downgraded Domino’s Pizza, Inc. (NYSE:DPZ) on April 5 to Market Perform from Outperform, cutting the price target from $480 to $390. The analyst further slashed his earnings estimates through 2024 below consensus, driven by a “disappointing” new franchise projection in the United States in 2022. He believes that Domino’s Pizza, Inc. (NYSE:DPZ)’s international openings will not offset the lower earnings in the U.S., since international outlets have about 60% of U.S. volumes and half the royalty rate.
Among the hedge funds tracked by Insider Monkey, 31 funds reported owning stakes in Domino’s Pizza, Inc. (NYSE:DPZ), compared to 36 funds in the earlier quarter. Renaissance Technologies holds a significant position in the company, with 955,878 shares worth $539.4 million.
Here is what LRT Capital Management has to say about Domino’s Pizza, Inc. (NYSE:DPZ) in its Q4 2021 investor letter:
“Domino’s Pizza is the world’s largest franchisor of pizza restaurants with over 13,800 locations in 85 countries. As for any restaurant operator, the key metric to consider for Domino’s Pizza is same-store-sales (SSS) growth. Growing same-store-sales are ultimately how a restaurant business increases earnings from its existing assets. The company continues to impress in this criterion with SSS having grown in the U.S. for 40 consecutive quarters, and an astounding 109 straight quarters internationally.
Two-thirds of the company’s stores are currently abroad, and the international segment remains the company’s largest growth opportunity, as the penetration of convenient fast food remains lower abroad than in the United States. Pizza is a product with exceptionally high gross margins, one that “translates” well across different cultures, and one that literally “travels well”, not losing much of its appeal when delivered in a cardboard box. The rise of 3rd party delivery platforms such as Uber Eats, Doordash and Grubhub is challenging the pizza category as it has expanded the number of choices consumers have for convenient takeout. However, the economics of food delivery remain challenging for most restaurants and platforms alike, while pizza delivery continues to be highly profitable. Regardless of how the “delivery wars” currently playing out end, Domino’s financial results show little impact of this increased competition, and the company continues to deliver exceptional financial performance.
Domino’s Pizza stock is not optically cheap based on forward earnings, however, the company has routinely reported earnings growth of over 20% in almost all quarters since 2009. Given the company’s high growth rate, international growth opportunities, and capital light business model, which allows for returns on invested capital of over 40%, we are happy to continue to hold the shares.”
5. The Howard Hughes Corporation (NYSE:HHC)
Pershing Square’s Stake Value: $1,386,260,000
Percentage of Pershing Square’s 13F Portfolio: 12.85%
Number of Hedge Fund Holders: 27
The Howard Hughes Corporation (NYSE:HHC) is a Texas-based diversified real estate company that owns and develops commercial, residential, and hospitality establishments in the United States. Bill Ackman owns a $1.38 billion stake in The Howard Hughes Corporation (NYSE:HHC) as of Q4 2021, accounting for 12.85% of his total 13F investments.
On March 15, The Howard Hughes Corporation (NYSE:HHC) announced the approval of a new $250 million share buyback program, on the heels of November’s buyback announcement of $250 million. This program reflects the company’s healthy balance sheet and underlying net assets.
The Howard Hughes Corporation (NYSE:HHC)’s full-year revenue for 2021 increased 104.13% from the prior year to $1.42 billion. The net income of $56.1 million in 2021 also rebounded sharply from the $20.1 million loss in 2020.
JPMorgan analyst Anthony Paolone initiated coverage of The Howard Hughes Corporation (NYSE:HHC) on January 31 with an Overweight rating and a $125 price target. According to the analyst, The Howard Hughes Corporation (NYSE:HHC)’s operating portfolio allows exposure to attractive themes like demographic shifts, the strengthening housing market, and commercial real estate development. The analyst believes there is a possibility for re-rating as the company streamlines its business.
According to Insider Monkey’s Q4 data, 27 hedge funds were bullish on The Howard Hughes Corporation (NYSE:HHC), with combined stakes worth $1.68 billion, compared to 25 funds in the previous quarter, holding stakes in the company worth $1.4 billion. Harris Associates is one of the leading position holders in The Howard Hughes Corporation (NYSE:HHC), with approximately 2 million shares valued at $203.3 million.
Just like Lowe’s Companies, Inc. (NYSE:LOW), Hilton Worldwide Holdings Inc. (NYSE:HLT), and Chipotle Mexican Grill, Inc. (NYSE:CMG), The Howard Hughes Corporation (NYSE:HHC) is one of the best stocks to buy now as per Bill Ackman’s Pershing Square.
Here is what Rhizome Partners has to say about The Howard Hughes Corporation (NYSE:HHC) in its Q4 2021 investor letter:
“In Q4, Howard Hughes Corporation (HHC) announced the sale of its Chicago office tower for more than $1 billion. The building was 85% leased at the time the sale was announced. HHC contributed the land, valued at $85 million, and an additional $5 million in cash. The expected pre-tax proceeds to HHC are estimated at $270 million. This is an outstanding outcome for an urban office development project delivered after Covid ravaged the office sector. The company also gained approval for its $850 million development project on the site of the former parking lot in the Seaport in New York City. This is an important milestone after a long and contentious zoning process. HHC also bought a 37,000-acre shovel-ready master-planned community in Phoenix, AZ, for $600 million. We still believe that the company is an excellent developer and each community continues to strengthen with the development of new amenities. This strength will eventually be manifested in rent growth, ample net operating income (NOI) upon stabilization, and simplification of the story over time. The market does not yet appreciate these unique characteristics of the Howard Hughes missions. We’ll continue to wait patiently for the market to agree with us.”
4. Restaurant Brands International Inc. (NYSE:QSR)
Pershing Square’s Stake Value: $1,452,512,000
Percentage of Pershing Square’s 13F Portfolio: 13.47%
Number of Hedge Fund Holders: 24
Restaurant Brands International Inc. (NYSE:QSR) was founded in 1954 and is headquartered in Toronto, Canada. It operates as a restaurant franchiser and operator, with brands like Tim Hortons, Burger King, Popeyes Louisiana Kitchen, and Firehouse Subs under its banner. Bill Ackman’s Pershing Square owns close to 24 million shares of the company, worth $1.45 billion, representing 13.47% of the total 13F securities.
On February 15, Restaurant Brands International Inc. (NYSE:QSR) declared a $0.54 per share quarterly dividend, a 1.9% increase from its earlier dividend of $0.53. The dividend was paid on April 6, to shareholders of record on March 23. Restaurant Brands International Inc. (NYSE:QSR) delivers a dividend yield of 3.65% as of April 11.
The company published its Q4 results on February 15, posting earnings per share of $0.74, topping estimates by $0.05. The $1.55 billion revenue increased 13.84% year-over-year, exceeding estimates by roughly $42 million. Deutsche Bank analyst Brian Mullan maintained a Buy rating on Restaurant Brands International Inc. (NYSE:QSR) but lowered the firm’s price target on the stock to $72 from $75 in light of the Q4 results.
Among the hedge funds tracked by Insider Monkey, 24 funds held long positions in Restaurant Brands International Inc. (NYSE:QSR) at the end of December 2021, compared to 22 funds in the previous quarter. Harris Associates owns one of the largest stakes in Restaurant Brands International Inc. (NYSE:QSR), with 5.6 million shares worth $342.7 million.
Here is what Pershing Square Capital Management has to say about Restaurant Brands International Inc. (NYSE:QSR) in its Q4 2021 investor letter:
“QSR is a high-quality business with significant long-term growth potential trading at a highly discounted valuation.
Comparable sales have recovered or are well on their way to recovery.
Tim Hortons Canada improved to a mid-single-digit decline during Q3 relative to 2019.
Burger King U.S. under new leadership and poised to make a recovery.
Burger King International and the Popeyes brand continue to grow well with strong same-store sales growth relative to 2019 levels. As underlying sales trends recover, QSR’s share price should more accurately reflect our view of its business fundamentals.
Management continuing to make investments for future growth.
Digital: G&A investment to modernize digital platforms and loyalty programs.
New Units: Return to historical mid-single-digit unit growth in 2021 and beyond.
Brand Acquisitions: Purchased Firehouse Subs for $1bn in December.
Remains cheap relative to intrinsic value and peers.
Trades at less than 18x our estimate of 2022 free cash flow per share.
The company began repurchasing shares in August.
As underlying sales trends recover, QSR’s share price should more accurately reflect our view of its business fundamentals. QSR’s share price increased 3% in 2021 and has decreased 7% year-to-date in 2022.”
3. Chipotle Mexican Grill, Inc. (NYSE:CMG)
Pershing Square’s Stake Value: $1,948,818,000
Percentage of Pershing Square’s 13F Portfolio: 18.07%
Number of Hedge Fund Holders: 47
Chipotle Mexican Grill, Inc. (NYSE:CMG) is a California-based company that operates restaurants under the Chipotle Mexican Grill brand. The company has restaurants in the United States, Canada, the United Kingdom, France, Germany, and the rest of Europe. Pershing Square held over 1 million Chipotle Mexican Grill, Inc. (NYSE:CMG) shares in the fourth quarter of 2021, worth $1.94 billion, representing 18.07% of the total securities.
Chipotle Mexican Grill, Inc. (NYSE:CMG) reported earnings for the fourth quarter of 2021 on February 8, posting an EPS of $5.58, exceeding estimates by $0.29. Revenue for the period stood at $1.96 billion, up approximately 22% from the prior-year quarter, topping market consensus by $1.76 million.
On March 30, KeyBanc analyst Eric Gonzalez maintained an Overweight rating on Chipotle Mexican Grill, Inc. (NYSE:CMG), as he believes the company has expanded the implementation of its 5%-6% price increase to an additional 810 stores. The analyst does not expect prominent consumer retaliation and believes that a nationwide price increase in the 5%-6% range suggests upside to current consensus margin/EPS estimates.
According to Insider Monkey’s Q4 data, 47 hedge funds were bullish on Chipotle Mexican Grill, Inc. (NYSE:CMG), compared to 39 funds in the earlier quarter. The total stakes held in Q4 amounted to $3.5 billion. Alkeon Capital Management is one of the leading stakeholders of the company, with shares worth over $502 million.
Here is what Pershing Square Capital Management has to say about Chipotle Mexican Grill, Inc. (NYSE:CMG) in its Q4 2021 investor letter:
“Chipotle’s superb performance continued in 2021 driven by ongoing strength in digital sales and a recovery of in-store ordering.
Average restaurant sales have now eclipsed the 2015 peak of $2.5mm.
-Same-store sales grew 19% in 2021, or 21% from 2019 levels.
-Strong contribution from innovations including the quesadilla and smoked brisket.
-Superlative value proposition drives pricing power and protects margins.
-Chicken burrito/bowl still priced below $8 in most parts of the country.
-Longer-term opportunity to drive average restaurant sales well beyond $3mm.
Chipotle has a long runway for robust growth.
✓ New unit growth algorithm of 8% to 10% annually.
✓ Chipotlane digital drive-thrus now in 12% of existing and 80% of new stores.
✓ Menu innovations and loyalty program enhancements.
✓ Operating leverage with 40% incremental restaurant margins.
✓ Plans for international expansion given success achieved in Canada. CMG’s share price increased 26% in 2021 and has decreased 16% year-todate in 2022.”
2. Hilton Worldwide Holdings Inc. (NYSE:HLT)
Pershing Square’s Stake Value: $1,964,590,000
Percentage of Pershing Square’s 13F Portfolio: 18.22%
Number of Hedge Fund Holders: 48
Hilton Worldwide Holdings Inc. (NYSE:HLT) is an American multinational hospitality company that operates hotels under the Waldorf Astoria Hotels & Resorts, Canopy by Hilton, Hilton Hotels & Resorts, Hilton Garden Inn, Hampton by Hilton, and Hilton Grand Vacations brands, in addition to others.
Securities filings for Q4 2021 reveal that Bill Ackman’s Pershing Square owns 12.5 million shares of Hilton Worldwide Holdings Inc. (NYSE:HLT), valued at $1.96 billion, representing 18.22% of the total holdings.
In 2021, Hilton Worldwide Holdings Inc. (NYSE:HLT)’s revenue for the year stood at $2.4 billion, reflecting a year-over-year growth of 52.75%. Net income in 2021 came in at $410 million, a strong rebound from the net loss of $715 million in the preceding year.
On February 22, Wells Fargo analyst Dori Kesten raised the price target on Hilton Worldwide Holdings Inc. (NYSE:HLT) to $160 from $147 and kept an Equal Weight rating on the shares after the Q4 results were published. The analyst continues to appreciate Hilton Worldwide Holdings Inc. (NYSE:HLT)’s high margin/fee driven model and believes the lodging demand recovery will benefit the company in 2022. However, the shares are trading at a significant premium, and the analyst thinks greater share price upside can be found elsewhere in the sector in the short-term.
Among the hedge funds tracked by Insider Monkey, 48 funds were bullish on Hilton Worldwide Holdings Inc. (NYSE:HLT) at the end of Q4 2021, compared to 44 funds in the earlier quarter. Boykin Curry’s Eagle Capital Management is one of the biggest position holders in the company, with 7.3 million shares worth $1.14 billion.
Here is what Pershing Square Capital Management has to say about Hilton Worldwide Holdings Inc. (NYSE:HLT) in its Q4 2021 investor letter:
“Hilton is a high-quality business with a multi-year runway of accelerated earnings growth and an exceptional management team. Industry conditions poised to exceed pre-COVID levels in the near term.
HLT well positioned for enhanced long-term performance.
-Average daily revenue per room (“RevPAR”) likely to recover to pre-COVID levels before the end of 2022.
-Occupancy is improving with average daily rate (“ADR”) already above pre-COVID levels.
-Ability to change room rates daily provides a hedge against inflation.
HLT well positioned for enhanced long-term performance.
-Market share likely to increase over time.
-Committed to higher long-term structural margins given productivity actions.
-Substantial capital return over time.
COVID-19 validated HLT’s unique high-quality asset-light business model.
-Ability to deftly navigate the “1,000-year-flood” supports higher valuation.
Hilton is poised to deliver long-term earnings meaningfully greater than pre-2020 levels. HLT’s share price including dividends increased 40% in 2021 and has decreased 2% year-to-date in 2022.”
1. Lowe’s Companies, Inc. (NYSE:LOW)
Pershing Square’s Stake Value: $2,645,923,000
Percentage of Pershing Square’s 13F Portfolio: 24.54%
Number of Hedge Fund Holders: 72
Lowe’s Companies, Inc. (NYSE:LOW) is the largest holding in Bill Ackman’s Q4 portfolio, with the billionaire owning 10.2 million shares worth $2.6 billion. The stock accounts for 24.54% of the total 13F investments. Lowe’s Companies, Inc. (NYSE:LOW) is a home improvement retailer based in the United States.
Lowe’s Companies, Inc. (NYSE:LOW)’s full-year 2021 revenue stood at $96.2 billion, up from $89.5 billion in the prior year. Similarly, net income in 2021 increased to $8.4 billion from $5.8 billion in 2020.
On March 22, Lowe’s Companies, Inc. (NYSE:LOW) announced its plans to sell $750 million of 3.35% notes due 2027, $1.5 billion of 3.75% notes due 2032, $1.5 billion of 4.25% notes due 2052, and $1.25 billion of 4.45% notes due 2062. The proceeds will be utilized for corporate expenditure.
Wells Fargo analyst Zachary Fadem on April 7 maintained an Overweight rating on Lowe’s Companies, Inc. (NYSE:LOW) but lowered the firm’s price target on the shares to $260 from $295, based on 18-times his full-year 2023 EPS estimate. According to the analyst, this represents a short-term PE ratio that is in line with the 3/5-year averages, which he believes is attributed to the company’s structural topline, improving margins, and continuous business initiatives.
Lowe’s Companies, Inc. (NYSE:LOW) declared on March 18 a $0.80 per share quarterly dividend, in line with previous. The dividend is payable on May 4, to shareholders of record as of April 20. Lowe’s Companies, Inc. (NYSE:LOW) is a reliable dividend king, with close to 60 years of consecutive dividend increases under its belt.
Eric W. Mandelblatt’s Soroban Capital Partners is one of the top stakeholders of Lowe’s Companies, Inc. (NYSE:LOW), with 3.8 million shares worth $989.6 million. Overall, 72 hedge funds were bullish on the stock at the end of December 2021, up from 60 funds in the last quarter.
Here is what Pershing Square Capital Management has to say about Lowe’s Companies, Inc. (NYSE:LOW) in its Q4 2021 investor letter:
“Lowe’s is a high-quality business with significant long-term earnings growth potential
Supportive macroeconomic backdrop
-Aging housing stock, lack of new inventory, robust home equity values, and unprecedented pro project backlog
-COVID-19 causing millennials to enter the housing market
Positioned to grow EPS largely independent of market conditions
-Idiosyncratic revenue opportunities driving share gains
-Self-help initiatives catalyzing operating margin expansion
-Buybacks representing ~8% of current market capitalization planned for 2022
Multi-year business transformation with substantial earnings upside
-Margin target of 13% has substantial upside; Home Depot at ~15.3% and increasing
-Potential to generate high-teens EPS growth over the next several years.
Lowe’s continues to trade at a significantly discounted P/E multiple relative to Home Depot despite materially higher perspective EPS growth. LOW’s share price including dividends increased 63% in 2021 and has decreased 10% year-to-date in 2022.”
You can also take a look at 10 Oil & Gas Stocks to Invest In According to Rajiv Jain’s GQG Partners and 10 Dividend Stocks to Buy Now According to Billionaire Leon Cooperman.
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Disclosure: None. 7 Best Stocks to Buy Now According to Bill Ackman is originally published on Insider Monkey.
