Bill Ackman was at one point dubbed “Baby Buffett,” but news broke this week that the Pershing Square billionaire hedge fund manager had ditched his stake in Warren Buffett’s Berkshire Hathaway (NYSE: BRK.A, BRK.B).
Pershing’s Berkshire stake was valued at nearly $1 billion, and when Ackman first bought the shares last summer, he said he bought on the expectation that Buffett would spend some of the $137 billion of “excess cash” on large acquisitions and stock repurchases.
But that hasn’t happened.
Even before the coronavirus pandemic hit, Buffett sat on his cash pile. And now, Buffet has signaled he’s feeling far less certain about how the U.S. recovers in the wake of the pandemic relative to other crises he’s witnessed in the past.
Ackman, meanwhile, is ready to deploy the cash at his disposal.
“Today, we have $10 billion of capital to invest,” Ackman said on a call with investors on Wednesday. “We can be much more nimble. And so our view was generally we should take advantage of that nimbleness, preserve some extra liquidity in the event that prices get more attractive again.”
Ackman said on the call that Pershing Square has “differentiated between companies that are survivors [of the pandemic] that in some cases will benefit from a competitive standpoint” amid the crisis.
Pershing added to its position in life sciences and equipment group Agilent (NYSE: A), and real-estate development company Howard Hughes (NYSE: HHC). The firm also added to its stake in Restaurant Brands International (NYSE: QSR), which owns Burger King and Popeye’s Chicken among other chains, betting that budget-conscious consumers will shift to cheaper eateries.
In that same vein, Pershing also stuck with its stake in Chipotle (NYSE: CMG) for its “fortress balance sheet” and zero debt.
The firm boosted its stake in home-improvement retailer Lowe’s (NYSE: LOW) by 50% and believes it will be a longer-term beneficiary amid the pandemic. It also rebuilt its stake in Starbucks (NASDAQ: SBUX), noting that while the coffee chain has been hit hard by COVID-19, it will “weather the current storm and emerge even stronger.”
Ackman also had high praise for Hilton (NYSE: HLT), though he warned that investors will have to be patient for its “resilient business model.” He also noted that the hotelier is working on its technology and is developing perks like keyless room entry to lure its clients back.
“We still like what we own, and we still think the stocks are cheap,” Ackman said.