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The Howard Hughes Corporation (HHC): Billionaire Bill Ackman Still Believes It Is Undervalued

Pershing Square, an NYC-based hedge fund that is managed by a famous investor and billionaire, Bill Ackman, recently published its Q1 2019 Investor Letter. If you are intrigued, you can download a copy of the letter here. In it, the fund reported a 36.9% increase of its NAV per share for the quarter ended March 31st, 2019, and as usual, Bill Ackman shared his views on the companies it has invested in. Among those stocks was The Howard Hughes Corporation (NYSE:HHC) for which, he said the following:

“The Howard Hughes Corporation (“HHC”)

HHC’s first quarter results highlight positive progress at the company’s core master planned communities (MPCs) in Houston and Summerlin (Las Vegas), and its condo sales in its Hawaii towers.

Despite significant progress in HHC’s core business, project delays and initial losses at HHC’s Seaport District (New York City) continue to consume the majority of analyst and investor focus and may have contributed to the recent decline in the company’s stock price. Although there have been delays at the Seaport, management remains confident regarding the long-term value-creation potential of this unique asset. The Seaport represents less than 10% of the company’s total asset base valued at cost so we do not believe that the slower than expected stabilization of this asset is material to HHC.
HHC’s stock has increased 9% year-to-date. We continue to believe that HHC trades at a large discount to its underlying NAV per share.”
Andrey_Popov/Shutterstock.com

Andrey_Popov/Shutterstock.com

The Howard Hughes Corporation is a Dallas-based real estate management company with a market cap of $4.51 billion. Its beginnings date to 1913, when it was founded by Howard R. Hughes as a part of the oil drilling business. Over the years, when the company was run by his son, Howard Hughes, Jr., it transformed its business shifting to real estate operations.

Since the beginning of the year, its’ shares have gained 8.12%, and on May 29th, they had a closing price of $104.47 per share. The stock is trading at a price-to-earnings ratio of 51.51. In its last financial report for the first quarter of 2019, The Howard Hughes Corporations reported net income attributable to common stockholder of $31.8 million, or $0.74 per diluted share, versus $1.5 million, or $0.03 per diluted share for the same quarter of 2018.

As per Insider Monkey’s database, the most valuable positions in The Howard Hughes Corporation at the end of March 2019, was held by Murray Stahl’s Horizon Asset Management, and it was worth $196.84 million, on the account of 1.79 million shares. The next in line of hedge funds with sizeable positions in the company was Natixis Global Asset Management’s Harris Associates, which held 1.66 million shares with a value of $182.77 million. Other notable investors with large stakes in the stock aside from Bill Ackman’s Pershing Square include Amy Minella’s Cardinal Capital, Jeffrey Furber’s AEW Capital Management, and Stephen J. Errico’s Locust Wood Capital Advisers.

Disclosure: None.

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