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Howard Hughes (HHC) Has Fallen 52% in Last One Year, Underperforms Market

If you are looking for the best ideas for your portfolio you may want to consider some of Pershing Square Capital Management’s top stock picks. Pershing Square, an investment management firm, is bullish on Howard Hughes Corp (NYSE:HHC) stock. In its Q2 2019 investor letter – you can download a copy here – the firm discussed its investment thesis on Howard Hughes Corp (NYSE:HHC) stock. Howard Hughes Corp (NYSE:HHC) is a real estate company.

On August 13, 2019, Pershing Square had released its Q2 2019 investor letter. The investment firm said that Howard Hughes Corp (NYSE:HHC) was one of the biggest contributors to its performance for the first six months of 2019. The stock has posted a return of -52.2% in the trailing one year period, underperforming fund’s benchmark the S&P 500 Index which returned 22% in the same period. This suggests that the investment firm was wrong in its decision. On a year-to-date basis, Howard Hughes Corp (NYSE:HHC) stock has fallen by 52.0%.

Earlier this month, we published an article revealing Pershing Square’s bullish investment thesis on Howard Hughes Corp (NYSE:HHC) stock in its Q2 2020 investor letter. This suggests that the investment firm has been bullish for a long time on Howard Hughes Corp (NYSE:HHC).

Pershing Square fund posted a return of 45.3% during the first half of 2019, outperforming fund’s benchmark the S&P 500 Index which returned 18.5% in the same period. Let’s take a look at comments made by Pershing Square about Howard Hughes Corp (NYSE:HHC) in the Q2 2019 investor letter.

“HHC’s first half results continue to highlight the strength of its core master planned communities (MPCs) and stabilized income-producing commercial properties. Summerlin and Bridgeland, HHC’s two MPCs with the largest value of unsold residential land, continue to perform extremely well. Bridgeland has seen rapid acceleration of land sales, which reflects the steady maturation of the community and its desirability to new homeowners.

In addition to residential land sales, HHC has a significant, under-appreciated profit opportunity in the commercial development of its MPCs. As MPCs reach a tipping point of residential density, demand arises for retail, office, multi-family and hospitality development in HHC-owned MPC town centers. Over time, the stable and recurring real estate cash flows (net operating income or NOI) from these properties will represent a growing percentage of HHC’s value. We believe that HHC’s current NOI represents only a fraction of the long-term opportunity, and expect the company to continue to capitalize on its decades-long commercial development pipeline.

HHC is also demonstrating significant progress in its Ward Village and Seaport assets. Ward Village’s two most recent condo towers developments are experiencing strong pre-sales momentum. The robust pace of sales across the six Ward Village condo towers that are either delivered or under construction reaffirms the strong appetite for HHC’s planned future condo projects in the area, which should accelerate over the coming years.

The Seaport is closer to achieving a critical mass of offerings that will enable it to generate sustained NOI performance. Traffic in the Seaport increased about 50% year over year driven by new restaurant and store openings. HHC completed a $250 million five-year term loan secured by a portion of the property. This highly strategic financing provides non-recourse capital to fund remaining development while reducing HHC’s equity commitment to the Seaport.

HHC’s stock has increased 33% year-to-date. On June 27th, the company announced that the Board of Directors is conducting a broad review of strategic alternatives. A wide range of options is being considered including a sale of the company; a sale, joint venture or spin-off of a portion of the company’s assets; a recapitalization of the company; or changes in the corporate structure of the company. The Board has retained Centerview Partners to assist in its strategic review. We continue to believe that HHC trades at a significant discount to its intrinsic value, and look forward to the results of the strategic review.”

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In Q1 2020, the number of bullish hedge fund positions on Howard Hughes Corp (NYSE:HHC) stock decreased by about 4% from the previous quarter (see the chart here), so a number of other hedge fund managers don’t seem to agree with Howard Hughes’ growth potential. Our calculations showed that Howard Hughes Corp (NYSE:HHC) isn’t ranked among the 30 most popular stocks among hedge funds.

The top 10 stocks among hedge funds returned 185% since the end of 2014 and outperformed the S&P 500 Index ETFs by more than 109 percentage points. We know it sounds unbelievable. You have been dismissing our articles about top hedge fund stocks mostly because you were fed biased information by other media outlets about hedge funds’ poor performance. You could have doubled the size of your nest egg by investing in the top hedge fund stocks instead of dumb S&P 500 ETFs. Below you can watch our video about the top 5 hedge fund stocks right now. All of these stocks had positive returns in 2020.

Video: Top 5 Stocks Among Hedge Funds

At Insider Monkey we scour multiple sources to uncover the next great investment idea. Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost precious metals prices. So, we are checking out this junior gold mining stock.. We go through lists like the 10 most profitable companies in America to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. You can subscribe to our free enewsletter below to receive our stories in your inbox:

Disclosure: None. This article is originally published at Insider Monkey.