Billionaire Bill Ackman, the founder of the Pershing Square Capital hedge fund, is bullish on stocks, including his best three stocks.
Most know Bill Ackman for his vocal assertions that Herbalife (NYSE: HLF) is a pyramid scheme. However, on CNBC last week, Ackman noted that, “Stocks are cheap.”
With many of his positions, he acts as an activist investor. But not just any activist; he’s generally a longer-term investor. For example, he’s owned his Howard Hughes (NYSE: HHC) stake since 2010 and has said he’ll probably own it forever.
“We’re principally a long-only fund, with the exception of Herbalife,” Ackman said last week of Pershing Square “We own concentrated positions in companies. We own them for years.
With that in mind, here are billionaire Bill Ackman’s three best stocks to own today:
Bill Ackman Stock No. 1: Mondelez (NASDAQ: MDLZ)
Ackman’s Herbalife short in 2012 was a $1 billion bet. It was a sizable bet in absolute terms, but he’s making much bigger bets on the long-side. Last month, Ackman announced a $5 billion position in Mondelez. The snack foods company also has fellow activist investor Nelson Peltz involved. Peltz’s Trian Partners has been trying to get Mondelez to merge with the PepsiCo (NYSE: PEP) snack business for a couple years.
Nonetheless, Ackman feels there are a couple of ways to win here. One, is that the company could remain a standalone business, cuts costs and “…gets to its potential and will do very, very well.” Another way to win is if Mondelez becomes a takeover target.
One potential suitor could be Kraft Heinz (NASDAQ: KHC), where Warren Buffett just orchestrated a Kraft and Heinz merger. Ackman notes, “If you had to make a list of companies that Buffett would like to own, Mondelez is certainly on the list.”
Mondelez has had its missteps with investing heavily in emerging markets. However, it has since reined in spending and is watching inventory levels closely, especially in Brazil. It also has a $3.5 billion restructuring plan in place that’s expected to save $1.5 billion in annual costs starting in 2018.
Bill Ackman Stock No. 2: Canadian Pacific (NYSE: CP)
Some of Bill Ackman’s more interesting stocks in the current environment are those that he’s owned for years. Ackman has been an activist investor at Canadian Pacific since 2011. Since that time, the stock has gained an annualized 23%.
Ackman has noted that Canadian Pacific is stronger and more profitable than just a couple years ago. Over the years, Canadian Pacific has actively been cutting costs and reconfiguring its network.
But shares are down 25% year-to-date due to a decline in oil-related shipments. In truth, it has less exposure to the declining oil prices than other rails. About two-thirds of its revenues are generated from more steady products like grain, fertilizer, intermodal and met coal.
Bill Ackman Stock No. 3: Restaurant Brands International (NYSE: QSR)
Ackman became an activist at Restaurant Brands (at the time Burger King) since mid-2012, when he helped bring the company public. The merger of Burger King and Tim Hortons last year, which formed Restaurant Brands, created the third-largest quick-service restaurant company in the world.
It’s also a lean operator, having gone through various operational overhauls when 3G Capital was in charge. With the addition of Tim Hortons, Burger King gains a stronghold in Canada. Tim Hortons owns over 85% of the market share for the Canadian donut and coffee quick-service segment.
One key growth avenue for Restaurant Brands could be global expansion. Meanwhile, the two will likely focus on further customer acquisition and marketing of the dual brand.
In the end, the focus of Ackman’s portfolio shouldn’t be about Herbalife. Ackman for the most part runs a longer-term long-only fund. Some of his new stocks and stocks he’s owned for years are far more enticing than Herbalife.
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