21/8. PSTH Showdown - Nike, Worth The Gamble ?
I have shared billionaire hedge fund manager - Bill Ackman’s stocks holdings back in February 2024. Click here ! to read the original post.
It’s been 6 months since and it is just about right time to find out this investment guru’s latest direction.
As individual investor, we should be reviewing our holdings periodically as well and determine if it requires adjustment/s.
What Has Changed ?
August brought much anticipated 13F filings from famous investors.
This allows stock traders to see what their favorites did in the previous quarter, with much attention turning to Bill Ackman’s Q2 holdings release.
On Wed, 14 Aug 2024, Bill Ackman’s Pershing Square Capital Management released their stock holdings report for the period up to 30 Jun 2024.
It revealed only 9 stocks worth $10,411,824,000 as of then. (see below)
Two purchases in Q2.
Ackman reinvested a tiny portion of his sales profits, buying up stocks from currently “undervalued” companies and some with excellent future prospects.
What 2 stocks did Bill buy?
Bill bought 6,854,510 shares of Brookfield Corp.
It represents 2.73% in Bill’s portfolio.
This Canadian investment company is an alternative Asset manager & REIT firm.
With focuses on (a) real estate, (b) renewable power, (c) infrastructure & venture capital and (d) private equity assets.
It manages over $725 billion in renewable energy, real estate, and infrastructure investments.
Mr Ackman decided to let others work for him.
(2) $Nike(NKE)$.
The 2nd purchase was 3,040,132 shares of Nike.
With that Nike represents a 2.20% position in Pershing’s portfolio.
The prolific investor decided to place some of his cash into the currently struggling sports brand.
NKE shares added +5.07% in the latest trading session after the news of Ackman’s addition.
For the week ending 16 Aug 2024, NKE stock price has gained +11.33%.
Why Nike ?
NKE’s YTD performance has been a disappointing -21.89% loss (as of 16 Aug 2024).
Ackman could be motivated by Nike’s underwhelming Q2 earnings report.
And also, the belief that the sportswear brand is strong enough to recover from this temporary setback.
Not Mentioned.
Actually, Ackman is not new to the sports outfit brand, NKE.
At the end of 2017, Pershing Square held about 5.8 million shares of it.
It was a similar story back then.
Nike faced a decline in market share (North America), due to increased competition from a rejuvenated Adidas.
According to The Wall Street Journal, by 22 Mar 2018, Bill has sold the entire stake, after several weeks when Nike's stock price climbed +32%.
For 6 months of investment & waiting, he pocketed around $100 million.
Could it be a case of de’ja vu for Bill, this time round ?
Market’s Opinions.
(1) Zacks Investment Management, Client portfolio manager, Brian Mulberry believes
Mr Ackman may have the ear of NKE’s executives.
And perhaps be able to lend some influences on maybe how to get the ship righted.
For Nike at this point in time, is to try and find their way back home.
(2) Content Creator on “X” (formerly Twitter), Oguz O:
He believed Mr Ackman got it wrong this time.
He feels Bill Ackman’s buying NKE is a big mistake.
Mr Ackman’s belief that NKE the brand is very strong and will ultimately make a comeback, may not materialize.
This is because, Oguz O think NKE is not undervalued enough.
As a result, there is nothing to come back from.
It’s already trading at 21 PE earnings with no growth.
Q2 - More Sales than Buys.
In Q2 2024, Ackman decided to divest more than buy by making notable sales that amounted to an overall -9% reduction in his portfolio.
His #1 largest sale was fast-food restaurant $Chipotle Mexican Grill(CMG)$.
He sold 8,384,035 shares, that accounted for a -22.54% decrease in this portfolio holding.
The sale is potentially motivated by profit-taking.
Ackman bought CMG stock in Q3 2016 and has been expanding its portfolio position continuously until Q2 2024.
All these times, CMG stock grew over +700% during this period, reaching an all-time high on 18 Jun 2024 at $68.55 (after stock split) or $3,427.50 (before stock split).
His #2 second largest sale was Search-engine giant - Alphabet Inc.
In total, Pershing Square Capital Management’s CEO sold:
1,829,613 shares of Alphabet (GOOG)$; constituting -19.51% of PSTH holdings.
368,336 shares of Alphabet (GOOGL)$, making up -8.46% of PSTH holdings.
3 Smaller sales:
Additionally, Mr Ackman sold 3 other companies’ shares from his holdings.
$Hilton(HLT)$ - Hospitality sector. 228,890 shares (2.49% of PSTH holdings) were sold.
$Restaurant(QSR)$ - Consumer cyclical sector. 205,593 (0.88% of PSTH holdings) were sold.
Canadian Pacific Kansas City Limited (CP)$ - Industrials sector. 129,887 shares (0.86% of PSTH holdings) were sold.
Investment Strategy.
Above trades align with Ackman’s “value investment” strategy where he:
Looks for famous companies/ brands that are undervalued.
But have potential for future growth.
All the while waiting for the “right” entry point / price and buy the dip. Eg. Nike, his latest Q2 purchase.
My viewpoints: (mine only)
After reading the post, I cannot help but wonder is “now” really the most optimal time to take profit?
Why such thoughts ?
If you compare Mr Bill Ackman and Mr Warren Buffett, they share a commonality.
In Q2 2024, both of them have disposed certain shares in their holdings. (see below)
For Mr Buffett’ it was his AAPL stake.
Q4 2023: BRK sold Apple Inc shares that accounted for 49% of Berkshire stock portfolio.
Q1 2024: The stake was further trimmed, with Apple making up 40% of the portfolio.
Q2 2024: Reduction continued, with Apple representing 30% of the portfolio.
By June 2024, Berkshire’s stake in Apple had been reduced to 400 million shares, a -55% reduction from 905 million shares in December 2023.
Do both of them have x-ray visions that could cut through the US market “smoke screens", clouding our visions, making it less than 20/20 perfect !
When it comes to investing, do we set a target and take profit when it is achieved. What about long-term investment strategy - obsolete ?
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Do you think Mr Ackman’s value investment approach is the right strategy ?
Do you think Nike will bounce back in the pink of health soon, given positive sentiments seeping into US market ?
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Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.
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