Andrew Carnegie is said to have said, “The way to get rich is to put all your eggs in one basket and then keep an eye on that basket.”
Bill Ackman has amassed a net worth of more than $9 billion by following a modified version of the strategy. All of the assets of his Pershing Square Capital Management hedge fund are currently invested in just eight stocks, two of which are different share classes for the same company.
Despite his small holdings, Ackman has had several big winners this year. Here are the billionaire hedge fund manager’s best-performing stocks in 2024 so far.
1. Chipotle Mexican Grill
Chipotle Mexican Grill (NYSE: CMG) is considered Ackman’s best stock of the year. Shares of the restaurant chain have risen nearly 34% this year after rising 65% in 2023.
Ackman trimmed Pershing Square’s position in Chipotle by 9.8% in the first quarter. However, it remained the hedge fund’s largest individual holding at the end of the quarter, accounting for more than 20% of Pershing Square’s total portfolio.
A key factor behind Chipotle’s strong performance so far in 2024 is the company’s solid growth. The company reported that first-quarter revenue rose 14% year over year to $2.7 billion, and adjusted earnings per share rose 27% to $13.37.
Chipotle also made waves in March when it announced a 50-for-1 stock split. The company executed the big split after the market close on June 25, 2024.
2. Alphabet
Google Parent Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL) trails Chipotle slightly as Ackman’s second-best performer so far in 2024. The tech giant’s shares have risen 31% this year.
Pershing Square owns both Alphabet’s Class A and Class C shares. As of the end of Q1, they made up 6.1% and 13.3% of the hedge fund’s total portfolio, respectively.
The generative AI boom has given Alphabet’s Google Cloud business a nice tailwind. In Q1, the unit’s revenue rose more than 28% to $9.6 billion.
The bulk of Alphabet’s revenue, however, comes from its other businesses, primarily Google Search and YouTube. Those businesses continue to perform well, with total Google Services revenue up nearly 14% year over year in Q1 to $70.4 billion.
3. Hilton Worldwide Holdings
Ackman’s No. 3 stock for 2024, with less than six months left in the year, could surprise. Stocks of hotel operator Hilton Worldwide Holdings (NYSE: HLT) are up 18% year to date.
Technically, Hilton was Pershing Square’s second-largest holding at the end of Q1. However, with Alphabet’s Class A and Class C shares combined, it would have been the hedge fund’s third-largest position.
Hilton’s revenue rose 12% year over year in Q1 to $2.3 billion. Profit rose nearly 29% to $265 million, or $1.04 per diluted share.
Are they still bargains?
I would be wary of buying Chipotle after the stock’s impressive run. The Mexican restaurant chain’s shares are trading at a sky-high forward price-to-earnings ratio of 56.8. That’s a high level that’s hard to justify given Chipotle’s growth.
Hilton Worldwide Holdings also seems a bit pricey. The forward earnings multiple is 30.3. Again, I don’t think Hilton’s growth prospects justify this valuation.
That leaves Alphabet. It’s not cheap either, with shares trading at 24.3 times forward earnings. Some investors may worry that artificial intelligence (AI) poses an existential threat to the company’s search business.
But Ackman said last year that Alphabet “will be a dominant player in AI for the very, very long term.” I agree. I like the prospects for Google Cloud and Waymo’s self-driving car technology. Of Ackman’s three biggest winners of 2024 so far, I think Alphabet is the best pick for long-term investors.
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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Keith Speights holds positions at Alphabet. The Motley Fool holds positions at and recommends Alphabet and Chipotle Mexican Grill. The Motley Fool has a disclosure policy.
Billionaire Bill Ackman’s Best-Performing Stocks So Far In 2024: Are They Still Worth Buying? was originally published by The Motley Fool
