Outperformance: Pershing Square achieved 800 to 1,000 basis points of outperformance relative to the S&P 500. Howard Hughes Net Operating Income: Approaching $300 million from income-producing real estate assets. Investment Activity: Trimmed five positions, sold one entirely, added to two existing positions, and bought three new positions. Uber Investment: Up about 35% from cost since acquisition. Universal Music Group Position: Reduced by just under 40%. Brookfield Distributable Earnings: Up 26% in Q1. Google Operating Profit Growth: 17% last quarter. Restaurant Brands Operating Profit Growth: Expected to grow more than 8% this year. Chipotle Same-Store Sales: Down 0.4% in the first quarter. Nike Net Cash Position: Approximately $1.5 billion. Hilton Room Count Growth: 6% to 7% on average. Hertz Liquidity: More than $1 billion available.

Warning! GuruFocus has detected 6 Warning Sign with LSE:PSH.

Release Date: May 22, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

Pershing Square Holdings Ltd (LSE:PSH) achieved 800 to 1,000 basis points of outperformance relative to the S&P 500, driven by a unique portfolio. The company has made several new investments, including a significant stake in Howard Hughes, aiming to transform it into a diversified holding company. Pershing Square Holdings Ltd (LSE:PSH) has strategically invested in Amazon at a historically low valuation, capitalizing on market volatility. The company has a strong focus on businesses insulated from tariffs and global trade flows, reducing exposure to economic uncertainties. Pershing Square Holdings Ltd (LSE:PSH) has successfully managed portfolio adjustments, including trimming positions in overvalued stocks and reinvesting in undervalued opportunities.

Negative Points

The uncertainty surrounding tariff policies and geopolitical tensions, such as those involving China and Russia-Ukraine, pose potential risks to market stability. Chipotle and Nike have faced challenging starts to the year, with share prices down due to external factors like severe weather and tariffs. The economic sensitivity of some investments, such as Canadian Pacific, has led to strategic divestments despite long-term potential. The potential impact of tariffs on Nike, which imports all merchandise from Southeast Asia, remains a concern despite its strong cash position. Hertz's turnaround is challenged by moderating demand in corporate and government travel sectors, despite its potential for profitability.

Q & A Highlights

Q: How does Pershing Square Holdings plan to manage potential conflicts of interest between its current funds and Howard Hughes? A: Bill Ackman (Trades, Portfolio), CEO, explained that neither he nor Ryan Israel will receive compensation from Howard Hughes in cash or equity. Instead, the entire Pershing Square team is available to Howard Hughes under a $15 million annual fee arrangement. Any fees received will be rebated to reduce the fees of the funds proportionally. Ackman emphasized that the mandates of Pershing Square Funds and Howard Hughes are distinct, minimizing conflict risks.

Story Continues

Q: What is the rationale behind Pershing Square's investment in Amazon? A: Ryan Israel, Chief Investment Officer, highlighted Amazon's dual business model, comprising AWS and its retail operations, as a key attraction. The investment was made when Amazon's share price dropped significantly, offering a unique opportunity. Pershing Square believes Amazon's scale and reinvestment strategy will drive long-term growth, despite short-term market concerns.

Q: Can you provide an update on the investment in Uber? A: Charles Korn, Investment Team Member, noted that Uber was acquired at a dislocated valuation due to concerns over autonomous vehicles. Pershing Square believes Uber will play a central role in the AV market through partnerships. Recent developments, including successful AV operations with Waymo, support their thesis. Uber's strong operating results and growth prospects further bolster confidence in the investment.

Q: How is Pershing Square addressing the challenges faced by Chipotle? A: Manning Feng, Investment Team Member, acknowledged Chipotle's challenging start to the year but emphasized management's proactive initiatives to boost sales. These include new marketing campaigns and operational improvements. Pershing Square believes these efforts, along with Chipotle's value proposition, will drive a return to mid-single-digit sales growth in the latter half of 2025.

Q: What are the prospects for Fannie Mae and Freddie Mac under the current administration? A: Bill Ackman (Trades, Portfolio) expressed optimism about the potential release of Fannie Mae and Freddie Mac from conservatorship, following supportive comments from President Trump. Ackman believes these entities could become valuable assets for a U.S. sovereign wealth fund, benefiting both shareholders and taxpayers. Pershing Square holds a significant position in these entities, anticipating substantial value creation.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.

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