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Pershing Square Capital Management, L.P., which is run by the famous investor Bill Ackman and known for taking concentrated bets, recently increased its stake in The Howard Hughes Corp. (HHC). A recent 13D filing revealed that Ackman significantly increased his stake in the stock on December 13.  Howard Hughes is a specialized real estate development company.

Overall, Pershing’s holding in Howard Hughes rose to roughly 6.4 million shares from 1.2 million shares at the end of the third quarter. It means that Pershing now has a 14.8% holding in the company. The filing reveals that the company is allowing Pershing the ability to buy up to 26% of the common stock.

Not an Investor Favorite

The sharp rise in Pershing’s holding in the company seems surprising, given that the stock was not popular among investors during the third quarter. During that quarter, the aggregate 13F shares were unchanged at 36.3 million. Overall, 74 firms increased their holdings, and 31 created new positions. Additionally, 29 firms exited the stock and 91 reduced their holdings.

The stock certainly hasn’t had a stellar 2019, with shares rising by 26.2%. That’s less than the S&P 500’s gains of 28.5%. But still, it hasn’t held Pershing back from significantly increasing its stake in the company. One can only speculate as to why the hedge fund increased its position by so much.

Concentrated Holdings

The holding isn’t even a small one, with the total position worth roughly $740 million. It makes the stock the seventh-largest holding in the hedge fund manager’s portfolio. But here’s the catch, there are only eight stocks in the portfolio.

(WhaleWisdom)

Recent Success

However, it is hard to argue with Ackman’s recent performance. According to data compiled by WhaleWisdom, the fund has seen its holding, and most significant position in Chipolte Mexican Grill, Inc. (CMG), more than double since they first took a stake in the stock in the third quarter of 2016. Meanwhile, its second-largest position, Restaurant Brands International Inc. (QSR), rose by over 66% since the fourth quarter of 2018. Also, the firm’s third-largest holding, Hilton Worldwide Holdings Inc. (HLT), climbed by 54% since the fourth quarter of 2018.

Pershing’s big plunge into Howard Hughes is undoubtedly noteworthy and eye-catching, considering the prospects for future growth seem lumpy at best. Analysts estimate that earnings will fall by 68% next year to $0.58 per share, and then surge to $4.62 per share in 2021. The lumpy earnings outlook would certainly be enough to scare off any ordinary investor, but Bill Ackman is no ordinary investor.

This entry was posted on Monday, December 23rd, 2019 at 8:21 am and is filed under 13F, Hedge Fund News. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.

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