Key Points:
- Bill Ackman’s hedge fund Pershing Square Capital Management made two new investments in Q2 2024 – Nike and Brookfield Corporation
- This marks Pershing Square’s first new investments since buying Alphabet stock in Q1 2023
- Ackman bought about 3 million shares of Nike, worth $239 million (2% of portfolio)
- He bought 6.8 million shares of Brookfield, worth $321 million (3% of portfolio)
- Ackman significantly reduced positions in Chipotle (-23%) and Alphabet (-20% Class C, -8% Class A)
- Nike’s stock jumped 4% in after-hours trading on news of Ackman’s investment
- Pershing Square’s total portfolio is worth about $10 billion and concentrated in just 9 stocks
Billionaire investor Bill Ackman made waves in the financial world this week as his hedge fund Pershing Square Capital Management disclosed new stakes in Nike and Brookfield Corporation. These mark Ackman’s first new investments in over a year, signaling potential shifts in his investment strategy.
According to regulatory filings, Pershing Square purchased approximately 3 million shares of Nike worth $239 million, representing about 2% of the fund’s $10 billion portfolio. The fund also acquired 6.8 million shares of Brookfield Corporation valued at $321 million, or 3% of the portfolio.
The Nike investment in particular caught the market’s attention, sending the sportswear giant’s shares up around 4% in after-hours trading. Nike’s stock has struggled in 2024, falling 26% year-to-date amid slowing sales growth and increased competition.
Ackman, known for his activist investing approach, previously held a stake in Nike in 2017 that netted a $100 million profit. While his current intentions for the company are unclear, some speculate he may push for changes to improve performance.
Brookfield Corporation, an alternative asset manager, represents a more diversified bet for Ackman. The company has faced headwinds from rising interest rates impacting its real estate and infrastructure businesses. However, it still managed to grow distributable earnings by 11% year-over-year in its most recent quarter.
To fund these new positions, Ackman made significant reductions to some of his largest existing holdings. Most notably, Pershing Square cut its stake in Chipotle Mexican Grill by 23%, selling over 8 million shares. This comes just as Chipotle CEO Brian Niccol, whom Ackman helped recruit in 2018, announced his departure to lead Starbucks.
The fund also trimmed its position in Google parent Alphabet, reducing its Class C shares by 20% and Class A shares by 8.5%. These sales likely reflect Ackman’s value investing philosophy, as both Chipotle and Alphabet have seen their valuations rise substantially in recent years.
Ackman’s concentrated investment approach remains intact, with Pershing Square holding just nine stocks that make up its entire portfolio. The fund’s top five positions – Hilton, Restaurant Brands International, Chipotle, Howard Hughes Holdings, and Alphabet – account for over 75% of assets.
This strategy has paid off handsomely for Ackman in recent years. Pershing Square has generated annualized returns of 31% over the past five years, roughly double the performance of the S&P 500. However, the fund is down 4.4% year-to-date in 2024, underperforming the broader market’s 15% gain.
The new stakes in Nike and Brookfield may signal Ackman’s belief that these companies are undervalued relative to their long-term potential. Both stocks have lagged the market in 2024, potentially offering attractive entry points for a value-oriented investor like Ackman.
While Ackman has stated he’s moving away from his past activist approach, his track record of pushing for changes at portfolio companies will likely keep investors and management teams on their toes.
For now, the billionaire investor is keeping his cards close to the vest, declining to comment on his plans for the new investments.
