Billionaire Bill Ackman Has Been Hedging During The Equity Sell-Off

Over a year ago, billionaire, Bill took a $1 billion size position in home improvement Lowe’s because he thought there were opportunities to improve its supply chain to serve customers better and enhance the customer experience through strategic brands and differentiated in-store experiences. Despite the equity markets being in correction territory, Bill is still up about 30% on the trade.

But Bill’s bigger bag was in Chipotle. Back in 2016, Bill’s Pershing Square bought almost 10% of the shares. Bill thought Chipotle had a strong brand, differentiated offering, enormous growth opportunity, and was undervalued. The following year Chipotle hired a new CEO, Brian Niccol. At Taco Bell, Niccol was known for food menu innovation as well as driving technological advancements to the customer ordering process. Under Brian’s leadership, digital sales quickly grew as Brian had hoped is that more and more customers will skip other eateries and just order their food at Chipotle. Despite the equity markets being in correction territory, Bill is still up about 40% on the trade.

Billionaire Bill Ackman's hedge fund delivered 58% returns in 2019 after making a big investment in Warren Buffett's Berkshire Hathaway. However, it hasn’t been all peaches and cream for the billionaire. The hedge fund's returns fell 4% in 2017, dropped 13.5% in 2016 and declined 20.5% in 2015.

So what is Bill doing now with since the equity markets have corrected due to the fear of COVID-19 slowing down the global economy, he is hedging?

Over the last 10 days, "we have taken steps to protect the portfolio from downward market volatility," wrote Ackman, who oversees Pershing Square Capital Management. He declined to say exactly what steps he took.

Ackman said hedging was preferable to selling off his portfolio of companies whose businesses are otherwise strong and include Chipotle Mexican Grill <CMG.N>, Hilton Worldwide <HLT.N>, home improvement chain Lowe's <LOW.N>, Burger King operator Restaurant Brands International <QSR.TO> and Berkshire Hathaway <BRKa.N>, among others. The hedge fund sold out of its position in Starbucks <SBUX.O> earlier in the year.

Source

QSR or Restaurant Brands International Inc. owns, operates, and franchises quick service restaurants under the Tim Hortons (TH), Burger King (BK), and Popeyes (PLK) brand names.

A couple of week ago, Shake Shack's stock tumbled, after the company posted a mixed earnings report that missed on revenue expectations. Shake Shack reported a wider-than-expected fourth-quarter net loss as revenue rose 22% and same-store sales fell 3.6%.

A couple of weeks ago, Wingstop Inc. stock fell after the company missed fourth quarter 2019 profit estimates by more than 17% and posted earnings per share of $0.14 vs expectations of $0.17.

And this was a couple of weeks ago, when COVID-19 was still isolated to Asia. Now that COVID-19 is a worldwide issue, are you going to think about eating out or cooking and eating at home? Exactly, thus the chart suggests price on QSR is headed to the weekly demand at $48.

This post is my personal opinion. I’m not a financial advisor, this isn't financial advise. Do your own research before making investment decisions.

Posted via Steemleo