Billionaire Bill Ackman Has 51% of His Hedge Fund's $13.6 Billion Portfolio Invested in Just 3 Stocks

Bill Ackman's Pershing Square Capital Management's recent investments are highlighted, with Uber Technologies being the largest holding at 19% of the $13.6 billion equity portfolio, followed by Brookfield (17%) and Howard Hughes Holdings (14%). Ackman sees significant value in Uber due to its network effect and potential partnerships with autonomous vehicle companies, while Brookfield is considered a bargain due to its diverse asset management and undervalued public equity holdings; a recent deal with Howard Hughes aims to transform the real estate business into a diversified holding company modeled after Berkshire Hathaway, though this will take time to materialize.

Analysis

Bill Ackman's Pershing Square is notably reorienting Howard Hughes Holdings (HHH) towards a diversified holding company model, akin to Berkshire Hathaway, following a recent deal that increased Pershing Square's stake to 47% through the acquisition of 9 million newly issued shares. This strategic shift involves leveraging HHH's real estate cash flow, which management projects could see net operating income grow up to 4% in 2025 and 37% from 2024 levels based on existing projects, to diversify into areas like insurance to generate float for further investments. This transformation, however, introduces new quarterly fees of $3.75 million and a 0.375% incentive fee to Pershing Square. Uber Technologies (UBER) represents Pershing Square's largest holding at 19% of its $13.6 billion equity portfolio, with an investment of approximately $2.3 billion now valued at $2.6 billion. Uber's strong performance is evidenced by a 35% surge in EBITDA and a 14% rise in gross bookings in the last quarter, alongside a 66% year-over-year increase in free cash flow to $2.3 billion. Management aims for over 90% EBITDA to free cash flow conversion within three years, and the stock trades at an enterprise value-to-EBITDA ratio of about 25, despite EBITDA growing around 30% annually. Brookfield (BN), constituting 17% of the portfolio with a $2.4 billion investment, is another key holding where Pershing Square recently added 6.1 million shares. Brookfield's distributable earnings rose 27% year-over-year in Q1, and management targets over 20% annual cash flow growth through 2029. Ackman views Brookfield as undervalued, with its market cap largely covered by public equity holdings, and trading at 13.8 times trailing distributable earnings, below a suggested floor multiple of 16.

Key Decisions for Investors

• Investors might consider Uber Technologies (UBER) given its strong EBITDA and free cash flow growth, significant network effects, and a valuation that appears reasonable relative to its growth prospects.
• Brookfield Corporation (BN) presents a potential value opportunity, with its diversified asset base, robust distributable earnings growth, and a current trading multiple below management's and Ackman's target valuations.
• For Howard Hughes Holdings (HHH), investors should weigh the long-term potential of its transformation into a diversified holding company under Ackman's stewardship and its current trading discount to estimated asset value against the new fee structure and the extended timeline required for the strategy to mature.
• Aligning with Pershing Square's concentrated bets offers exposure to Ackman's high-conviction ideas, but requires careful consideration of the specific fundamentals and outlook for each individual company within the portfolio.