Pershing Square 2018 Annual Investor Letter

This year started excellent for billionaire Bill Ackman and his activist hedge fund Pershing Square, which gained 31.9% since the beginning of the year through March 19^th, strongly beating the S&5 500 which delivered 13.5% over the same period. Although this is a promising start, we should remember that the last year also looked good all through November 13^th for which period the fund reported 9.7% (net of fees), only to end up being down by 0.7% for the full year, mainly as a result of 10.8% loss it had in December 2018.  Further, it is important to note that Pershing Square has been posting annual losses continuously for the last four years. The fund recently released its 2018 Annual Investor Letter – a copy of which you can download below.

In the letter, Bill Ackman says about this recent impressive performance -“I note that this excellent performance is due to strong earnings growth and positive developments across all of our portfolio companies. It would be impossible for every position in a large and diverse portfolio to outperform in a volatile market, but it can occur when an activist invests in a portfolio of 8-12 carefully selected companies.”

He also takes a look back at the last year’s performance – “2018 was an excellent year for PSH based on our portfolio companies’ operating results and their general business progress. We outperformed our benchmark, the S&P 500, by 370 basis points with a 0.7% decline in NAV per share for the year. Our performance was substantially stronger as of last year’s third quarter, with PSH’s NAV per share up 15.8% versus 10.6% for the S&P 500, before market turbulence and volatility unrelated to the businesses we owned intervened.”

As usual, in its annual letter, the fund provided a thorough analysis and update on every single position in its 13F portfolio, except for Element Solutions Inc (NYSE:ESI), which it dumped in 2019. Hence, the fund carefully discussed Chipotle Mexican Grill, Inc. (NYSE:CMG), Automatic Data Processing (NASDAQ:ADP), Restaurant Brands International Inc (TSE:QSR), Lowe’s Companies, Inc. (NYSE:LOW), Starbucks Corporation (NASDAQ:SBUX), Hilton Hotels Corporation Common Stock (NYSE:HLT), United Technologies Corporation (NYSE:UTX), and Howard Hughes Corp (NYSE:HHC). The fund also mentioned exiting MONDELEZ INTERNATIONAL INC Common Stock (NASDAQ:MDLZ), Nike Inc (NYSE:NKE), and Herbalife Nutrition Ltd (NYSE:HLF) during 2018.

You can download a copy of Pershing Square’s 2018 Annual Letter here.