Many investors pay close attention to the moves of hedge-fund heavyweight Bill Ackman, given his successful investing track record.
The chief executive of Pershing Square Capital Management discussed his stock positions (and former positions) within the Pershing Square Holdings fund in a letter to shareholders. Here are his comments on several of them.
Universal Music Group
“UMG’s decades-long runway for growth remains underappreciated by investors,” Ackman said.
“With increasing streaming penetration, combined with the development of new services, platforms, and business models, UMG can grow revenue at an annual rate of 10% or so for more than a decade.”
Restaurant Brands International
“QSR’s franchised business model is a high-quality, capital-light, growing annuity that generates high-margin brand royalty fees from its four leading brands: Burger King, Tim Hortons, Popeyes, and Firehouse Subs,” Ackman said.
“QSR is investing in each of its brands to position them for sustainable, long-term growth.”
Chipotle Mexican Grill
“Chipotle is one of the best-positioned consumer companies for the current inflationary world,” Ackman said.
“The company has tremendous pricing power due to the superb quality of its food, which is priced at a discount to many competitors with inferior offerings…”
“Hilton is a high-quality, asset-light, high-margin business with significant long-term growth potential,” Ackman said.
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“We expect demand to continue to strengthen from current levels, as anticipated moderation in leisure occupancy is likely to be more than offset by improvements in corporate transient business and group business.”
“Lowe’s is a high-quality business with significant long-term earnings growth potential underpinned by a superb management team,” Ackman said.
“The medium-term growth outlook for the home-improvement industry remains strong, as demand is likely to normalize at a materially higher level compared to the precovid era.”
Canadian Pacific Railway
“CP is a high-quality, inflation-protected business led by a best-in-class management team that operates in an oligopolistic industry with significant barriers to entry,” Ackman said.
“With an improving volume and pricing outlook combined with the upcoming transformational acquisition of Kansas City Southern, CP’s prospects are bright.”
Meanwhile, Ackman explained why he exited Domino’s Pizza and Netflix.
“In light of the company’s relatively high valuation in a volatile market environment, we decided to exit our investment to raise cash for alternative investment opportunities,” Ackman said.
“We have enormous respect for Domino’s…, and we expect the company to continue its long track record of success.”
“In April, we announced that we exited our position in Netflix following the company’s first-quarter results,” Ackman said.
“Management commentary and a required shift in the company’s business model towards ad-supported streaming caused us to lose confidence in our ability to predict the company’s future…”