DealBook Conference 2016

Bryan Beder

This article is part of a series that provides an ongoing analysis of changes to the Pershing Square 13F portfolio on a quarterly basis. It is based on Ackman’s Regulatory Form 13F filed 11/14/2022. Please visit our Tracking Bill Ackman’s Pershing Square Holdings article to get an idea of ​​how his holdings and our participation have progressed over the years previous update for the fund’s moves during the second quarter of 2022.

The value of Ackman’s 13F portfolio increased ~6% from ~$7.46B to ~$7.88B this quarter. The number of positions has dropped from 7 to 6. The portfolio remains highly concentrated with few big bets. The top three holdings account for approximately 62% of total portfolio value: Lowe’s Companies, Chipotle Mexican Grill and Restaurant Brands.

In addition to the partners’ shares, the fund also invests the capital of Pershing Square Holdings (OTCPK:PSHZF), a public entity which debuted in Euronext Amsterdam in October 2014. This was set up primarily to raise the amount of invested capital which it is permanent. Pershing Square Holdings had underperformed the S&P 500 since its 2012 EOY inception. That changed in 2019 as they worsened by about 50% in the three years to 2021. For 2022 through Nov. 15th, are down 9.1%. Their original flagship fund’s track record (early 2004) is excellent with annualized returns of ~16% compared to ~9.7% for the S&P 500.

Note 1: Pershing Square Holdings has always traded at a discount to the NAV. It is currently trading at ~$35 per share compared to a NAV of $52.77.

Note 2: This year they disclosed the following regarding their hedging strategy, principles and performance: “Principles: Asymmetric payoff structures along with monetization that provides liquidity during times of market dislocation. Strategy: Interest rate hedges from late 2020 to early 2022 as they believed the Fed would hike rates sooner than expected. Performance: $5.2 billion of their P&L came from hedging over the past three years. This compares to their current capital base of ~$11.5 billion.

Note 4: Pershing Square holds a ~10% stake in UMG Music Group (OTCPK:UMGNF) at an initial cost of ~€18 per share. It is currently trading at €21.57.

To learn more about Bill Ackman, check out the book “The Confidence Game: How Bill Ackman, Hedge Fund Manager, Called Wall Street’s Bluff.”

Quota transfers:

Domino’s Pizza (DPZ): DPZ was a ~11% stake in the portfolio settled in Q1 2021 at prices between ~$330 and ~$375 and the stock is currently trading at ~$392. The position sold this quarter at prices between ~ $310 and ~$417. They had a ~5.3% ownership stake in the business.

Increase bet:

Lowes Companies (LOW): LOW is currently the largest position with approximately 25% of the portfolio. It was established in the second quarter of 2018 at prices between $81 and $101 and increased approximately 9% in the next quarter at prices between $95 and $117. There was also a share increase of approximately 40 % in the first quarter of 2020 at approximately $84 per share. The four quarters through Q2 2021 saw a sell-off of ~20% at prices between ~$136 and ~$211. The stock is currently trading at ~$211. Recent quarters have seen only minor adjustments.

Note: Pershing Square’s cost basis at LOW is ~$85 per share.

Restaurants Brands International (QSR): QSR’s share is a large ~16% of portfolio share. Pershing Square’s original cost base was ~$16. Q3 of 2017 saw a sale of about 32% at prices between $59 and $66. in H1 2018 at prices between $53 and $64. The four quarters through Q3 2019 also saw sales up about 28% at prices between $52 and $79. In June 2020, they increased the approximately two-thirds position via futures contracts at a cost basis of $44.20. The stock is currently trading at ~$67. The last few quarters have seen only minor adjustments.

Hilton Worldwide Holdings (HLT): The large portfolio share of approximately 15% was established in October 2018. It was purchased at prices ranging from $64 to $78. The first quarter of 2020 saw the share increase to approximately 30% at a base cost approximately $70. The first quarter of 2022 saw a ~20% sell-off at prices between ~$129 and ~$158. The stock is currently trading at ~$139. The past two quarters have seen only small adjustments.

Note 1: Their overall cost basis is ~$72 per share.

Note 2: In the fourth quarter of 2018, Hilton Worldwide Holdings rejoined the portfolio after an eighteen month gap. The previous position was purchased in the third quarter of 2016 and sold a year later. Pershing Square said the new location was acquired at a better valuation than its previous purchase. Additionally, the corporate structure transitioned to a capital-light model following the early 2017 spin-off of Park Hotels & Resorts (PK) and Hilton Grand Vacations (HGV).

Canadian Pacific Railway (CP): CP is ~13% of the portfolio position purchased in Q4 2021 at prices between ~$64.50 and ~$78. The position was built this quarter at prices between ~$67 and ~$83. The stock is currently trading at ~$81.

Note: The location was not in their Q4 2021 13F report, but was disclosed in an amended filing this March.

Kept Stable:

Chipotle Mexican Grill (CMG): CMG is a large ~21% of portfolio position. The stake was settled in Q3 2016 at an underlying cost of ~$405 per share. The position sold down about 30% in Q3 2018 in the high 400 price range, followed by a ~17% decline over the next four quarters. Q1 2020 also saw a one-third sale at ~$860 per share. There was a ~7% cut in Q1 2021 to ~$1340 per share. Q3 2021 saw an increase of ~3% to ~$1910 per share. The stock is currently trading at ~$1509.

Howard Hughes Corporation (HHC): HHC is now a 9.58% of the 13F portfolio position. The holding was first established in 2010 following the spin-off from GGP Inc. The vast majority of the current holding comes from adding ~10 million shares in Q1 2020 at ~$50 per share through a private placement. The first quarter of 2021 saw the share increase by about 25% at prices between ~$78 and ~$102. The stock is currently at ~$70.

Note: They have an approximately 27% ownership stake in the business. In October, they announced a tender offer to purchase an additional 6.34 million shares of Howard Hughes at a price range of $52.50 to $60 per share. November 11thththe offer was extended and the price range increased to between $61 and $70 per share.

Fannie Mae (OTCQB:FNMA) and Freddie Mac (OTCQB:FMCC) are other long positions in the partnership — the holdings were disclosed in 13D filings on Nov. 15, 2013 — because they are not 13F stock, they are not listed in the 13F report. Ackman held just under 10% of the outstanding shares of both of these businesses: 115.57 million shares of FNMA at a cost basis of $2.29 and 63.5 million shares of FMCC at a cost basis of $2.29. 2.14. The combined investment outlay was ~$400 million. FNMA and FMCC are currently trading at ~$0.43 per share. In March 2018, Pershing Square said their Fannie/Freddie PFDs now amount to 21% of the total investment in the two GSEs. Their fourth quarter 2021 annual investor presentation had the following regarding Fannie/Freddie: “Remains confident in long-term value: believes re-privatization is a possibility regardless of court outcome”.

The following spreadsheet highlights changes to Pershing Square’s 13F stock holdings in Q3 2022:

Bill Ackman - Pershing Square Q3 2022 13F Report Q/Q Comparison

Bill Ackman – Pershing Square Q3 2022 13F Report Q/Q Comparison (John Vincent (author))

Source: John Vincent. Data constructed from Pershing Square 13F records for Q2 2022 and Q3 2022.

Leave a Reply

Your email address will not be published. Required fields are marked *