UNVGY - Tracking Bill Ackman's Pershing Square 13F Portfolio - Q3 2023 Update

2023-12-14 20:20:26 ET

Summary

• Ackman's 13F portfolio value decreased to $10.49B this quarter.
• The top three positions, Alphabet, Chipotle Mexican Grill, and Restaurant Brands, account for 49% of the total portfolio value.
• They increased Alphabet and Hilton Worldwide Holdings substantially during the quarter.

This article is part of a series that provides an ongoing analysis of the changes made to Pershing Square's 13F portfolio on a quarterly basis. It is based on Ackman's regulatory 13F Form filed on 11/14/2023. Please visit our Tracking Bill Ackman's Pershing Square Holdings article for an idea on how his holdings have progressed over the years and our previous update for the fund's moves during Q2 2023.

Ackman's 13F portfolio value decreased from ~$10.82B to ~$10.49B this quarter. The number of positions remained steady at 7. The portfolio remains heavily concentrated with a few huge bets. The top three positions account for ~49% of the total portfolio value: Alphabet, Chipotle Mexican Grill, and Restaurant Brands.

In addition to partner stakes, the fund also invests the capital from Pershing Square Holdings ( OTCPK:PSHZF ), a public entity that debut in Euronext Amsterdam in October 2014. This was set up primarily to increase the amount of capital invested that is permanent. Pershing Square Holdings had underperformed the S&P 500 since its EOY 2012 inception. This changed in 2019 as they compounded at ~50% in the three years through 2021. For 2022, they were down 9.1% and for 2023 through October 31, 2023, they are up 7.7%. Their original flagship fund's (2004 inception) track record is excellent with annualized returns of ~16.1% compared to ~9.4% for the S&P 500 index.

Note 1: Pershing Square Holdings ( OTCPK:PSHZF ) has always traded at a discount to NAV. It currently trades at $43.15 per share compared to NAV of ~$62.

Note 2: Pershing Square has a ~10% stake in UMG Music Group ( OTCPK:UMGNF ) at a cost-basis of ~€18 per share. It currently trades at €25.74. This is by far their largest equity stake, currently valued at ~$5B. The position is not in their 13F report, as it is not US listed.

Note 3: Pershing Square Tontine Holdings ( PSTH ), the liquidated SPAC, distributed SPARC shares (not tradeable currently) to previous PSTH common and warrant holders following its successful registration during the quarter.

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Stake Increases:

Alphabet Inc. ( GOOG ) : GOOG is a 17.21% of the portfolio position purchased from early March in the low-90s price range. There was a ~13% stake increase last quarter at prices between ~$104 and ~$128. That was followed by a ~20% increase this quarter at prices between ~$117 and ~$139. The stock currently trades above those ranges at ~$133.

Hilton Worldwide Holdings ( HLT ): The ~15% portfolio stake was established in October 2018. It was purchased at prices between $64 and $78. Q1 2020 saw a ~30% stake increase at a cost-basis of ~$70. Q1 2022 saw a ~20% selling at prices between ~$129 and ~$158. The stock currently trades at ~$177. There was a ~7% trimming during Q1 2023 while this quarter saw a ~10% increase.

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

Note 2: In Q4 2018, Hilton Worldwide Holdings came back into the portfolio after a gap of eighteen months. The previous position was purchased in Q3 2016 and disposed a year later. Pershing Square has said that the new position was acquired at a better valuation compared to their previous purchase. Also, the business structure has transformed into a capital-light model following the spinoff in early 2017 of Park Hotels & Resorts ( PK ) and Hilton Grand Vacations ( HGV ).

Howard Hughes Corp ( HHH ) : HHH is now a ~12% of the 13F portfolio position. The stake was first established in 2010 as a result of its spin-off from GGP Inc. The majority of the current stake is from the addition of ~10M shares in Q1 2020 at ~$50 per share through a private placement. Q1 2021 saw a ~25% stake increase at prices between ~$78 and ~$102. Q4 20222 saw another ~17% stake increase at an average cost of ~$72 per share. The stock is currently at $83.15. There was a minor increase in the last three quarters.

Note: Regulatory filings since the quarter ended show them owning ~18.85M shares (~38% of the business). This is compared to ~16.81M shares in the 13F report.

Stake Decreases:

Lowe's Companies ( LOW ): LOW is currently at ~14% of the portfolio. It was established in Q2 2018 at prices between $81 and $101 and increased by ~9% next quarter at prices between $95 and $117. There was also a ~40% stake increase in Q1 2020 at ~$84 per share. The four quarters through Q2 2021 saw a ~20% selling at prices between ~$136 and ~$211. That was followed by a ~25% reduction last quarter at prices between ~$199 and ~$226. The stock currently trades at ~$226. There was a minor ~5% trimming this quarter.

Note: Pershing Square's cost-basis on LOW is ~$85 per share.

Kept Steady:

Chipotle Mexican Grill ( CMG ): CMG is the second largest 13F position at ~17% of the portfolio. The stake was established in Q3 2016 at a cost-basis of ~$405 per share. The position was sold down by ~30% in Q3 2018 in the high-400s price-range and that was followed with a ~17% trimming over the next four quarters. Q1 2020 also saw a one-third selling at ~$860 per share. There was a ~7% trimming in Q1 2021 at ~$1340 per share. Q3 2021 saw a ~3% increase at ~$1910 per share. There was a ~14% trimming over the last two quarters at prices between ~$1364 and ~$2139. The stock currently trades at ~$2276.

Restaurant Brands International ( QSR ): The QSR stake is a large (top three) ~15% of the portfolio stake. Pershing Square's original cost-basis was ~$16. Q3 2017 saw a ~32% selling at prices between $59 and $66. That was followed with a ~22% reduction in H1 2018 at prices between $53 and $64. The four quarters through Q3 2019 had also seen a ~28% selling at prices between $52 and $79. In June 2020, they increased the position by roughly two-thirds through forward contracts at $44.20 cost-basis. The stock currently trades at $74.12. There was a minor ~4% trimming last quarter.

Canadian Pacific ( CP ) : CP is a ~11% of the portfolio position. A small stake was purchased in Q4 2021 at prices between ~$64.50 and ~$78. The current position was built during Q3 2022 at prices between ~$67 and ~$83. The stock currently trades at $76.85.

Fannie Mae ( OTCQB:FNMA ) and Freddie Mac ( OTCQB:FMCC ) are other long positions in the partnership - the holdings were disclosed in 13D filings on November 15, 2013 - as they are not 13F securities , they are not listed in the 13F report. Ackman held just under 10% of the outstanding shares of both these businesses - 115.57M shares of FNMA at a cost-basis of $2.29 and 63.5M shares of FMCC at a cost-basis of $2.14. The combined investment outlay was ~$400M. FNMA & FMCC currently trade at ~67c per share. In March 2018, Pershing Square said their Fannie/Freddie pfds now amounts to 21% of the total investment in the two GSEs. Their 2023 Interim Report had the following regarding Fannie/Freddie: " In our view, Fannie Mae and Freddie Mac remain valuable perpetual options on the companies' exit from conservatorship. ... We believe that it is simply a matter of when, not if, Fannie and Freddie will be released from conservatorship."

The spreadsheet below highlights changes to Pershing Square's 13F stock holdings in Q3 2023:

For further details see: