Prosper Junior Bakiny, The Motley Fool
5 min read
In This Article:
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Ackman holds sizable stakes in Alphabet, Uber, and Chipotle.
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All three companies are leaders in their respective industries.
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They also seem to still have excellent long-term prospects.
Getting investing ideas and inspiration from the most successful money managers on Wall Street isn't a bad approach, but you should still do your due diligence before pressing the buy button. Let's apply that strategy by looking at Pershing Square Capital Management, a hedge fund led by the billionaire Bill Ackman.
A sizable percentage -- 41.6%, to be exact -- of the hedge fund's portfolio is in three companies: Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL), Uber Technologies (NYSE: UBER), and Chipotle Mexican Grill (NYSE: CMG). Should you consider following Ackman's lead with these stocks? In my view, the answer is a resounding yes for all three.
About 14% of Ackman's portfolio is invested in Alphabet, including more than 5.7% in the class A shares that grant its holders voting rights, and nearly 8.3% in the non-voting class C shares. Alphabet was not a great stock to hold in the first half of the year. Even considering market volatility, shares underperformed the broader market by a significant margin.
However, this isn't because the company's financial results aren't strong. It's more likely that the market is pricing in several specific risks Alphabet faces, including the possibility that U.S. regulators will succeed in forcing it to get rid of its Chrome web browser following an antitrust lawsuit.
Still, there are good reasons to be optimistic about Alphabet's future, particularly when you consider its cloud computing and artificial intelligence (AI) businesses. According to Amazon CEO Andy Jassy, both industries are still in their early innings. Alphabet is a leader in both, and should benefit as these markets embark on a journey of significant long-term growth.
The company can also rely on its streaming ambitions with YouTube, one of the most popular platforms around. Furthermore, Alphabet benefits from a wide moat thanks to network effects and switching costs. Even with the antitrust threat, the company looks attractive once we focus on its growth opportunities and consistent earnings and cash flow.
If you're a long-term investor, I think you should seriously consider adding the stock to your portfolio.
As of the first quarter, Uber Technologies was Pershing Square Capital Management's largest holding. In fact, the fund opened its position in the ride-hailing specialist during the period, acquiring some 30.3 million shares of the company.
