"Tracking Bill Ackman’s Pershing Square Portfolio – Q3 2021 Update"
"Bill Ackman’s 13F portfolio value decreased from ~$10.71B to ~$9.46B this quarter.Pershing Square dropped Agilent Technologies during the quarter.The largest three 13F positions are Lowes Companies, Chipotle Mexican Grill, and Hilton Worldwide. They together account for ~61% of the portfolio.This article is part of a series that provides an ongoing analysis of the changes made to Pershing Square’s 13F portfolio on a quarterly basis. It is based on Ackman’s regulatory  filed on 11/15/2021. Please visit our  article for an idea on how his holdings have progressed over the years and our  for the fund’s moves during Q2 2021.Ackman’s 13F portfolio value decreased ~12% from ~$10.71B to ~$9.46B this quarter. The number of positions decreased from 7 to 6. The portfolio remains heavily concentrated with a few huge bets. The top three positions account for ~61% of the total portfolio value: Lowes Companies, Chipotle Mexican Grill, and Hilton Worldwide.In addition to partner stakes, the fund also invests the capital from Pershing Square Holdings (PSHZF), a public entity that debut in Euronext Amsterdam in October 2014. This was set up primarily to increase the amount of capital invested that is permanent. Pershing Square Holdings had underperformed the S&P 500 since its EOY 2012 inception. This changed in 2019 as they had an outstanding ~58% return. That was followed with a ~85% return in 2020. YTD through October, the return was 21.6%. Their original flagship fund’s (2004 inception) track record is excellent with annualized returns of ~16.7% compared to ~10.4% for the S&P 500 index.Note 1: As a closed end fund, Pershing Square Holdings (PSHZF) has always traded at a discount to NAV. It currently trades at $40 per share compared to NAV of $56.46.Note 2: in July 2020, Pershing Square sponsored the largest SPAC IPO to date, Pershing Square Tontine Holdings (PSTH). The offering had several retail-investor friendly attributes that made it stand out from the rest of the SPACs. The stock traded at a vast premium to trust value until the UMG transaction fell through. They have since unveiled a plan to return the capital raised back to shareholders while issuing what are termed SPARC warrants. PSTH currently trades below trust at $20.21.Note 3: Their investor-call on November 18th disclosed a new hedge: a very large notional short position in short-term US treasuries and some longer-term (10-yuear average) rates through certain out-of-the money options. The outlay was ~$170M across funds and it had returned ~6x (~$1B) as of the date of the call.Note 4: Pershing Square has a ~10% stake in UMG Music Group (UMGNF) at a cost-basis of ~€18 per share. It currently trades at ~€25.50.To learn more about Bill Ackman, check-out the book “”.New Stakes:None.Stake Disposals:Agilent Technologies (A): Agilent was a small ~4% of the portfolio stake established in Q3 2019 at prices between $66 and $78. Next quarter saw a large stake built at prices between $63 and $90. The entire position was sold this quarter at prices between ~$148 and ~$179. The stock currently trades at $152.Note: Their mid-year update said that the sale was to fund the purchase of Universal Music Group (UMGNF) shares.Stake Increases:Lowes Companies (LOW): LOW is currently the largest position at ~22% of the portfolio. It was established in Q2 2018 at prices between $81 and $101 and increased by ~9% next quarter at prices between $95 and $117. There was also a ~40% stake increase in Q1 2020 at ~$84 per share. Last four quarters had seen a ~20% selling at prices between ~$136 and ~$211. The stock currently trades at ~$248. There was a marginal increase this quarter.Note: Pershing Square's cost-basis on LOW is ~$85 per share.Chipotle Mexican Grill (CMG): CMG is a large ~21% of the portfolio position. The stake was established in Q3 2016 at a cost-basis of ~$405 per share. The position was sold down by ~30% in Q3 2018 in the high-400s price-range and that was followed with a ~17% trimming over the next four quarters. Q1 2020 also saw a one-third selling at ~$860 per share. There was a ~7% trimming in Q1 2021 at ~$1340 per share. This quarter saw a ~3% increase at ~$1910 per share. The stock currently trades at ~$1687.Hilton Worldwide Holdings (HLT): The large ~18% portfolio stake was established in October 2018. It was purchased at prices between $64 and $78. Q1 2020 saw a ~30% stake increase at a cost-basis of ~$70. There was minor trimming in the last four quarters while this quarter saw a marginal increase. The stock currently trades at ~$136Note 1: Their overall cost-basis is ~$72 per share.Note 2: In Q4 2018, Hilton Worldwide Holdings came back in to the portfolio after a gap of eighteen months. The previous position was purchased in Q3 2016 and disposed a year later. Pershing Square has said that the new position was acquired at a better valuation compared to their previous purchase. Also, the business structure has transformed into a capital-light model following the spinoff in early 2017 of Park Hotels & Resorts (PK) and Hilton Grand Vacations (HGV).Restaurant Brands International (QSR): The QSR stake is a large ~15.5% of the portfolio stake. Pershing Square’s original cost-basis was ~$16. Q3 2017 saw a ~32% selling at prices between $59 and $66. That was followed with a ~22% reduction in H1 2018 at prices between $53 and $64. The four quarters thru Q3 2019 had also seen a ~28% selling at prices between $52 and $79. Last June, they increased the position by roughly two-thirds thru forward contracts: $397.50M aggregate purchase price for a $44.20 per share cost-basis. The stock currently trades at ~$58. Last several quarters have seen only minor adjustments.Howard Hughes Corp (HHC): HHC is now a 12.64% of the 13F portfolio position. The stake was first established in 2010 as a result of its spin-off from GGP Inc. The vast majority of the current stake is from the addition of ~10M shares in Q1 2020 at ~$50 per share through a private placement. Q1 2021 saw a ~25% stake increase at prices between ~$78 and ~$102. The stock is currently at ~$88. This quarter also saw a minor ~1% increase at $92 per share.Domino’s Pizza (DPZ): DPZ is a 10.54% of the portfolio stake established in Q1 2021 at prices between ~$330 and ~$375 and the stock currently trades well above that range at ~$530. They have a ~5.3% ownership stake in the business. Last two quarters have also seen minor buying.Stake Decreases:None.Kept Steady:None.Fannie Mae (FNMA) and Freddie Mac (FMCC) are other long positions in the partnership - the holdings were disclosed in 13D filings on November 15, 2013 - as they are not , they are not listed in the 13F report. Ackman held just under 10% of the outstanding shares of both these businesses - 115.57M shares of FNMA at a cost-basis of $2.29 and 63.5M shares of FMCC at a cost-basis of $2.14. The combined investment outlay was ~$400M. FNMA & FMCC currently trade at ~$0.90 per share. In March 2018, Pershing Square said their Fannie/Freddie pfds now amounts to 21% of the total investment in the two GSEs. Bill Ackman said the following regarding Fannie/Freddie in an interview earlier this month: “The expectation is that they will become public without the conservatorship again. That happens when they are recapitalized. It will take several years as well as legislative action and regulatory steps. The stocks are worth 20x to 30x in that event”.The spreadsheet below highlights changes to Pershing Square’s 13F stock holdings in Q3 2021:Source: John Vincent. Data constructed from Pershing Square’s 13F filings for Q2 2021 and Q3 2021.Regulatory filings from 5/20/2021 thru 9/21/2021: Form 4 – 7/1 – CMG - 12,619 shares disposed @ $1533.84. 1,073,517 shares remain. Form 4 – 9/8 – HHC - ~150K shares acquired @ 92, 13.62M shares total. Form 4 – 9/8 – CMG - ~41K shares purchased at ~1910, 1.114M shares total.Long Summary for SA: “Their long-term performance is stellar and it is trading at a ~25% discount to NAV.”Info from Semi Annual Report released July 31, 2021: Ackman sold Agilent to fund tbe purchase of UMG shares as a result of the PSTH SPAC transaction falling through. On August 10, acquired 128,555,017 Ordinary Shares of UMG for $2.8 billion, representing 7.1% of the company. Intends to purchase the remaining 2.9% by September 9. Inflation Hedge: PSH’s current portfolio comprises nine companies that are well positioned for long term growth, and one asymmetric macro-economic hedge which will benefit PSH if there is an increase in interest rates. PSTH: NAV came down due to mark-to-market loss of 6.4% of gross assets – they have FWPs. Comment on SPAC Crash: enormous compensation for a SPAC sponsor for just getting a transaction done regardless of the outcome for shareholders, combined with limited Sponsor “skin in the game” – PSTH does not have any of these problems. In fact PSTH has more skin in the game than regular investors as there is potential for total loss on their $65M investment in sponsor warrants with 3-year lockup – also $1B FWP commitment means they won’t do just any deal to save the at-risk capital. SPARC: plan is to issue one $20 strike SPARC warrant for each PSTH and one $23 strike SPARC warrant for each PSTH warrant held after returning the trust of ~$20 back to PSTH shareholders. SPAC REFORM: We are unaware of a better and faster approach to SPAC industry reform than what would be achieved by the SEC approving SPARC expeditiously, as it may also motivate other SPAC market participants to abandon the current SPAC structure, and replace it with a much better acquisition vehicle for investors and sponsors. Fannie/Freddie: we do not need a favorable outcome in the courts for this to be a highly successful investment, as we believe the re-privatization of the two GSEs is their ultimate path, and existing shareholders will be beneficiaries of this outcome. That said, a win in the courts would greatly accelerate this outcome.April 2021 Portfolio Update & Weekly Net Asset Value and YTD return as of 9/14/2021 – Info: PSH NAV in USD – 48.77, YTD Return – 7.7%."