Andrew Carnegie is credited as saying, “The way to become rich is to put all your eggs in one basket and then watch that basket.”
Bill Ackman has amassed a net worth of over $9 billion by following a modified version of the strategy. All his Pershing Square Capital Management hedge fund’s assets are currently invested in only eight stocks — two of which are different classes of shares for the same company.
Despite having a small number of holdings, Ackman has several big winners this year. Here are the billionaire hedge fund manager’s best-performing stocks of 2024 so far.
1. Chipotle Mexican Grill
Chipotle Mexican Grill (NYSE: CMG) ranks as Ackman’s top stock of the year. Shares of the restaurant chain operator are up nearly 34% year to date after soaring 65% in 2023.
Ackman reduced Pershing Square’s position in Chipotle by 9.8% in the first quarter. However, it remained the hedge fund’s largest single holding at the end of the quarter, making up over 20% of Pershing Square’s total portfolio.
One key factor behind Chipotle’s strong performance so far in 2024 is the company’s solid growth. The company reported Q1 revenue jumped 14% year over year to $2.7 billion, and its adjusted earnings per share soared 27% to $13.37.
Chipotle also generated excitement in March when it announced a 50-for-1 stock split. The company conducted this big split after the market close on June 25, 2024.
2. Alphabet
Google parent Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL) trails slightly behind Chipotle as Ackman’s second-best performer so far in 2024. The tech giant’s shares have vaulted 31% higher this year.
Pershing Square owns both Alphabet’s class A and class C shares. At the end of Q1, they made up 6.1% and 13.3%, respectively, of the hedge fund’s total portfolio.
The generative AI boom has provided a nice tailwind for Alphabet’s Google Cloud business. In Q1, the unit’s revenue increased more than 28% to $9.6 billion.
Most of Alphabet’s revenue, though, is generated from its other operations — primarily Google Search and YouTube. These businesses also continue to perform well, with total Google Services revenue rising nearly 14% year over year in Q1 to $70.4 billion.
3. Hilton Worldwide Holdings
Ackman’s No. 3 stock of 2024, with less than six months remaining in the year, might be surprising. Shares 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 the class A and class C shares of Alphabet combined, it would have been the hedge fund’s third-largest position.
Hilton’s revenue increased 12% year over year in Q1 to $2.3 billion. Its earnings jumped nearly 29% higher to $265 million, or $1.04 per diluted share.
Are they still buys?
I’d be leery of buying Chipotle after the stock’s impressive run. The Mexican restaurant chain’s shares trade at a sky-high forward price-to-earnings ratio of 56.8. That lofty level is hard to justify with Chipotle’s growth.
Hilton Worldwide Holdings also appears to be a bit pricey. Its forward earnings multiple is 30.3. Again, I don’t think Hilton’s growth prospects warrant this valuation.
That leaves Alphabet. It isn’t cheap, either, with shares trading at 24.3 times forward earnings. Some investors could be worried that artificial intelligence (AI) presents an existential threat to the company’s search business.
However, Ackman said last year that Alphabet “will be a dominant player in AI for the very, very long term.” I agree with his take. I like the opportunities for Google Cloud and the Waymo self-driving car technology business. Of Ackman’s three biggest winners of 2024 so far, Alphabet is the best pick for long-term investors, in my view.
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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Keith Speights has positions in Alphabet. The Motley Fool has positions in and recommends Alphabet and Chipotle Mexican Grill. The Motley Fool has a disclosure policy.
Billionaire Bill Ackman’s Best-Performing Stocks of 2024 So Far: Are They Still Buys? was originally published by The Motley Fool
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