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 Lowe’s Companies, Inc. (NYSE: LOW) and shared their insights on the company. Lowe’s Companies, Inc. is a Mooresville, North Carolina-based retail company that currently has a $137.2 billion market capitalization. Since the beginning of the year, LOW delivered a 19.20% return, impressively extending its 12-month gains to 130.90%. As of April 01, 2021, the stock closed at $191.32 per share.
Here is what Pershing Square Holdings has to say about Lowe’s Companies, Inc. in their Q4 2020 investor letter:
“Lowe’s is a high-quality business with significant long-term earnings growth potential. We initiated our investment in the company in April 2018 largely because we believed that the hiring of a new high-caliber management team could dramatically improve the business and close the performance gap to its closest competitor, Home Depot. Marvin Ellison became CEO in July 2018, and immediately began working on a multi-year transformation plan to bolster Lowe’s retail fundamentals, reduce structural costs, expand distribution capabilities, and modernize systems and the company’s online capabilities.
In 2020, Lowe’s experienced unprecedented demand driven by consumers nesting at home, higher home asset utilization and a reallocation of discretionary spend. Lowe’s earlier decision to modernize the company’s online offering allowed it to meet consumers’ surging demand. Further, its commitment to improve the company’s retail fundamentals allowed Lowe’s to showcase its enhanced merchandising, greater in-stock-levels, and excellent customer service. In the fourth quarter, the company completed 95% of its store layout resets which include a more intuitive shopping experience complete with a more Pro-centric layout (by “Pro” we refer to the professional tradesmen that perform repair and maintenance, remodeling and construction services). The company is also rolling out a new Pro CRM tool, which should improve Lowe’s Pro market share.
Management remains focused on a myriad of operational initiatives designed to improve the customer shopping experience and the company’s long-term earnings power. In the near-to-medium-term, these initiatives include improving Lowe’s omnichannel capabilities including simplifying search and checkout features, launching three additional ecommerce fulfillment centers, enabling faster mobile order fulfillment, standing up dedicated store fulfillment teams, rolling out touchless Buy-Online-Pick-Up-In-Store lockers to all U.S. stores by April 2021, and reimagining scheduling and modes of delivery for certain large-format order deliveries (notably, appliances). These initiatives are examples of Lowe’s “Perpetual Productivity Improvement” program which is designed to improve market share and profit margins.
Lowe’s is making important strategic investments to position the business to continue to thrive. The company’s long-term outlook implies significant opportunity for continued earnings appreciation and margin expansion as it executes its multiyear business transformation.”
Our calculations show that Lowe’s Companies, Inc. (NYSE: LOW) 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, Lowe’s Companies, Inc. was in 71 hedge fund portfolios, compared to 83 funds in the third quarter. LOW delivered a 19.20% return in the past 3 months.