Stocks Key to Pershing Square’s Solid Performance in 2019



Chipotle gives a boost to Pershing Square

We saw in Why Chipotle Could Help Ackman Outperform after a Dismal 2018 how Chipotle Mexican Grill (CMG) has helped Pershing Square outperform in 2019. The price action in Chipotle stock has been on an accelerated uptrend since the company launched its loyalty program, Chipotle Rewards, on March 12.

Bill Ackman initially bought a stake in Chipotle in September 2016 at an average estimated price of $405. CMG was trading at $665.9 on March 19, implying a rise of 64% for Pershing Square since its acquisition. The stock has also significantly outperformed peers (XLY) Shake Shack (SHAK) and McDonald’s (MCD) in 2019.

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Restaurant Brands and ADP

Restaurant Brands International (QSR) and Automatic Data Processing (ADP) stocks have gained 21.8% and 17.9%, respectively, as of March 19—significantly outperforming the broader markets (SPY)(QQQ). Restaurant Brands International is Oppenheimer’s top idea for 2019 after factoring in its fourth-quarter results.

Pershing Square lost a proxy battle with ADP in 2017. Ackman was asking for three seats on the company’s ten-member board, but he failed to get any. Ackman has avowed that he supports ADP but that he might be back if ADP fails to perform. ADP has been transforming its business, which is working for its stock. In its most recent results, the company beat its revenue and earnings guidance. It also upgraded its earnings guidance for its fiscal year ending in June 2019.

Lowe’s potential

Lowe’s (LOW) stock has been another major contributor to Pershing Square’s performance. At the end of the fourth quarter, Lowe’s was Pershing Square’s second-largest holding. In Pershing Square’s latest shareholder letter, the company stated that it expects the stock to take off. The company thinks that “secular housing trends support long-term growth and reduce cyclicality.”

We discussed Bill Ackman’s position in Lowe’s in Is Bill Ackman’s Conviction in Lowe’s Stock Coming True? in more detail.

You can also check out Is 2019 Bill Ackman’s Comeback Year after a Series of Losses? to learn more about Ackman’s other bets and their performance.


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