Why Bill Ackman's Pershing Square's Top 4 Holdings Are Consumer Stocks

Bill Ackman’s Pershing Square Capital portfolio is heavy on consumer discretionary stocks, with over 60% allocated to the sector.

The billionaire hedge fund manager is the founder and CEO of Pershing Square Capital, which has close to $10.5 billion in assets under management. In October, at the CNBC Delivering Alpha conference, Ackman was asked what stocks he thought would perform well under current market conditions (high inflation and interest rates). His answer was simple – “businesses that have pricing power.”

Read about another billionaire leaning towards consumer stocks: Ray Dalio’s Bridgewater Bets Big On Retail With Stakes In Coca-Cola, Costco, And Walmart Among Top Holdings

Pershing Square’s top 4 holdings are all consumer discretionary stocks, aggregating to a 60.13% allocation in the fund’s AUM. Per their third-quarter 13F filing, Ackman added more of Hilton Worldwide Holdings HLT stock this quarter. Let’s examine if these four stocks have pricing power.

• Chipotle Mexican Grill CMG

For over a year now, Chipotle Mexican Grill has been raising menu prices. The firm’s revenues have still been trending higher, indicating the price increases didn’t impact sales to a large extent. In April, CEO Brian Niccol said the chain had “demonstrated its pricing power”.

• Restaurant Brands International Inc QSR

Restaurant Brands is the company behind popular restaurant chains Burger King, Tim Hortons, Popeyes and Firehouse Subs. Fifty-seven percent of the company’s revenues accrue from rents and royalties received from franchise accounts. These revenues are free from the risk of cost inflation, which gives the company good pricing power in its business.

• Hilton Worldwide Holdings

With hospitality industry stocks benefitting from U.S. consumer spending and pent-up travel demand post-pandemic, Hilton has been well-positioned to make good on the opportunity. The hotelier has increased its profit forecasts for the year, thanks to the advantages gained from its significant pricing power, Reuters reports.

• Lowe’s Cos Inc LOW

Home improvement retailer, Lowe’s, has “strong brand awareness with consumers” which gives it “pricing power to increase the average amount spent per year and the average ticket size” says analyst Stryke Capital Research.

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