Pershing Square Holdings Ltd, an investment management firm, published its fourth-quarter 2020 investor letter – a copy of which can be downloaded here. A net return of 70.2% was recorded by the fund for the year-end of 2020, outperforming its S&P 500 benchmark that delivered an 18.4% return in the same period. You can view the fund’s top 5 holdings to have a peek at their top bets for 2021.
Pershing Square Holdings, in their Q4 2020 investor letter, mentioned Starbucks Corporation (NASDAQ: SBUX) and shared their insights on the company. Starbucks Corporation is a Seattle, Washington-based coffeehouse company that currently has a $128.8 billion market capitalization. Since the beginning of the year, SBUX delivered a 2.24% return, impressively extending its 12-month gains to 68.28%. As of April 01, 2021, the stock closed at $109.38 per share.
Here is what Pershing Square Holdings has to say about Starbucks Corporation in their Q4 2020 investor letter:
“We exited our initial investment in Starbucks in January 2020, and opportunistically repurchased a stake in the company at a highly attractive valuation during the March market downturn. Management has handled the COVID-19 crisis incredibly well, which we believe will enable the company to emerge even stronger following the pandemic. At the company’s current valuation, about twice the price we paid one year ago, our expected returns from owning Starbucks are below our long-term targets. As a result, we recently sold our stake. Below we summarize our thoughts on the company. Despite the sale, we expect that Starbucks will continue to be a good, long-term investment.
Starbucks was well-prepared for the arrival of COVID-19 in the U.S. given the company’s large presence in China. As a result, the company quickly shifted to a drive-thru and delivery-only model at the beginning of the pandemic. As management reopened locations and in-store ordering, Starbucks began to experience a robust sales recovery.
Today, the company is already nearing a full sales recovery, and should be a major benefi ciary of a reopened global economy in 2021. By January 2021, same-store sales in the U.S. only declined by 2%. By the second quarter of 2021, Starbucks expects same-store sales in the U.S. to grow by 5% to 10% year over year, implying cumulative two-year comps of 2% to 7% with average-unit volumes above pre-COVID-19 levels.
Starbucks is continuing to experience robust growth in China, following the demise of its closest competitor in the region, Luckin Coffee, and plans to open 600 stores in China in 2021.
We expect Starbucks to benefi t from a number of post-COVID-19 tailwinds including pent-up consumer demand for the “third place” experience as many consumers who prefer to enjoy their beverages in store with friends and colleagues have not been able to do so for the past year. Starbucks has historically generated 50% of its sales from breakfast, a daypart geared towards work and school commuting, which should benefi t from a return of consumers to their pre-COVID-19 routines.
In addition to managing the COVID-19 crisis, management continues to invest in important growth initiatives including digital, new store formats, and menu innovation. In December 2020, Starbucks’ management underscored their confidence in the company’s future and increased its long-term outlook for revenue growth, margins, and earnings growth.”
Our calculations show that Starbucks Corporation (NASDAQ: SBUX) does not belong in our list of the 30 Most Popular Stocks Among Hedge Funds. As of the end of the fourth quarter of 2020, Starbucks Corporation was in 67 hedge fund portfolios, compared to 66 funds in the third quarter. SBUX delivered a 2.24% return in the past 3 months.
The top 10 stocks among hedge funds returned 231.2% between 2015 and 2020, and outperformed the S&P 500 Index ETFs by more than 126 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. Here you can watch our video about the top 5 hedge fund stocks right now. All of these stocks had positive returns in 2020.
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Disclosure: None. This article is originally published at Insider Monkey.
