Bill Ackman's Firm Exits Lowe's, Trims Chipotle Stake
Legendary Investor Series - Bill Ackman – Portfolio Update
Legendary billionaire investor Bill Ackman's Pershing Square Capital Management made significant changes to its portfolio, exiting its position in Lowe's Companies Inc.(LOW) and trimming its stake in Chipotle Mexican Grill (CMG), according to the latest quarterly filings. He has a highly concentrated portfolio of just 6 companies, reflecting his approach of making long-term investments in a few undervalued companies.
Pershing Square Capital Management Portfolio - As of the Latest SEC Filing (May 2024)
As mentioned above, Bill Ackman has made notable changes to his portfolio. According to his latest 13F filed in May 2024, after the changes, his portfolio is as follows.
Exiting Lowe's to free up capital
Ackman sold all of his Lowe's shares, completely exiting Lowe's. According to Ackman’s PowerPoint presentation, he “Exited Lowe’s after a highly successful, nearly six-year holding period, freeing up capital for new opportunities”.
Lowe's is a major American home-improvement retailer that operates home centers and hardware stores in North America and is the second-largest home improvement chain in the United States behind The Home Depot.
Trimming Chipotle
Ackman also trimmed his position in Chipotle, selling approximately 10% of his position in Chipotle. Chipotle remains Ackman's largest holding at approximately 20% of his portfolio, reflecting his continued confidence in the fast-casual restaurant chain's business model and growth potential.
Chipotle Mexican Grill is a large international fast-casual restaurant chain that operates made-to-order fast food restaurants in front of customers.
Insights from Bill Ackman’s 2023 Annual Report
According to the 2023 annual report of Bill Ackman's Pershing Square Capital Management, his firm follows a simple approach of a concentrated long-term investment portfolio.
“Our limited portfolio activity should not be a surprise. In that we are a long-term investor which attempts to identify businesses we can own for a decade or more, you should generally expect limited changes in our equity portfolio composition. Frenetic investment activity is often the enemy of long-term performance. An investment manager who markets itself as a long-term owner of businesses, but who is constantly buying and selling new securities is likely misrepresenting their strategy.”What is less obvious from a high-level reading of the Pershing Square Capital Management portfolio is that the Pershing Square Capital Management portfolio has an active hedging program.
“We seek to mitigate extrinsic risks by investing in hedges and other asymmetric instruments that offer large payoffs if negative events occur....... Our hedging program has enabled to us to be comfortable remaining fully invested even during periods of market turmoil. Our approach to portfolio management, however, may cause us to maintain a profitable hedge longer than would be optimal if our only concern were maximizing the profit on the hedge. We do so because our goal is to generate overall portfolio gains rather than maximizing the profits of individual hedges.”Bill Ackman’s Approach to Investing – Feb 2024
Below is a 13 minute clip of Bill Ackman's approach to how to invest from the Lex Friedman Podcast in February 2024.
Summary
Bill Ackman's Pershing Square Capital Management made significant changes to its portfolio in 2024, exiting its entire position in Lowe's Companies Inc. after a nearly 6-year holding period to free up capital for new opportunities, while reducing its stake in Chipotle Mexican Grill by approximately 10%, although the fast-casual chain remains Ackman's largest holding at 20% of the portfolio, reflecting his firm's disciplined, concentrated, long-term investment approach focused on identifying undervalued companies with the potential for sustained growth, coupled with an active hedging program to mitigate extrinsic risks, as outlined in Pershing Square's 2023 Annual Report and Ackman's own commentary on his investment philosophy.
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