Lowe’s (LOW) stock is up 8.2% as of February 12. While the stock has underperformed the broader markets (SPY) (QQQ) YTD (year-to-date), Pershing Square’s investment in the stock is already up 15% based on its average purchase price of $86.
Bill Ackman expects the stock to take off, as he believes that “secular housing trends support long-term growth and reduce cyclicality.” Lowe’s new management team contains several former Home Depot (HD) executives, and Lowe’s new CEO, Marvin Ellison, has played a key role in its turnaround. Pershing Square now expects Ellison to narrow Lowe’s performance gap with Home Depot. The further improvement in its margins and sales productivity could unlock even more value for Lowe’s shareholders over time.
Ackman also took on a $696 million stake in Hilton Worldwide (HLT) during the fourth quarter. The fund had previously exited HLT in 2017, but it purchased its shares for a lower valuation than when it made its exit. Ackman believes that HLT’s current valuation is near its lowest point since its spin-off in early 2017 and should rerate given its high business quality and long-term earnings growth potential.
Howard Hughes (HHC) is also up 13.9% YTD. It’s a fully integrated real estate developer. Pershing Square sold some stake in the company in the third quarter for portfolio management purposes. The fund maintains a large long-term investment in the company.