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Bill Ackman is a billionaire hedge fund manager Pershing Square Holdings. It has been crushing the market for years. For example, since 2019, his wallet Tripled In value.
Ackman does not diversify his portfolio for the sake of diversification. When someone likes a stock, they invest whatever they can. Currently, he has more than 15% of his investment portfolio in one company. He's owned this stock for years, and it's fair to say he thinks it has a lot of upside from here.
Bill Ackman loves this complex $3.5 billion stock
Howard Hughes Holdings (NYSE: SHH) He has a strange history. Nearly 15 years ago, she was fired from General growth characteristicswhich it later acquired Brookfield Real Estate Partners. Howard Hughes Holdings, then known as The Howard Hughes Company, owned an odd collection of properties that General Growth Properties believed were not being fairly valued by the market. For example, the company owned commercial real estate in New York City, a collection of planned communities in the western and southern United States, and air rights — also known as a building right — over a popular property in Las Vegas. Vegas.
It turns out that the market didn't really understand how to value a company's assets. When the company went public, the shares were valued less The value of the book. This means that the market did not even believe that the assets were worth the value listed on the financial statements.
Over the years, the market reversed course, sometimes valuing the company at more than 2.5 times book value. However, since that peak in 2014 and 2015, the value has continued to decline, falling in early 2020 on fears that the pandemic would crush stocks exposed to office and commercial properties.
Howard Hughes still has an odd mix of assets, but recently, the company announced plans to simplify its business. Now trading at just 1.15 times book value, with a market cap of $3.5 billion, this seems like a good time to follow Ackman into a cheap company with promising turnaround potential.
If you're patient, now is a good time to buy Howard Hughes
Akman has held Howard Hughes shares since 2010, the year it spun off General Growth Properties. For most of that time, he served as president of the company. However, in early April, he indicated he would relinquish that role, handing it over to Scott Sellers, the former CEO of Archstone, a real estate investment trust with a market capitalization of $22 billion, nearly seven times that amount. From Howard Hughes's current rating.
Don't make the mistake of thinking that Ackman has blown his investment. Last quarter, he boosted his position in Howard Hughes, bringing his stake to nearly 19 million shares. Ackman is handing over the reins as Howard Hughes embarks on a turnaround effort that could see its valuation significantly improve over the coming years.
Last October, Howard Hughes revealed that several non-core assets, including the company's South Street Seaport in lower Manhattan, the Las Vegas Aviators baseball team, and a majority stake in the rights to fly over the Fashion Show mall, would be spun off in 2016. Las Vegas Vegas and its 25% stake in Jean-Georges Restaurants. Aggregating disparate assets like this makes it difficult for the market to value them accordingly — the same reason Howard Hughes was originally spun off from General Growth Properties.
What's left for Howard Hughes? Basically a portfolio of Master planned communities In growing areas of Arizona, Nevada, Hawaii and Texas. These are basically one-stop shops for real estate developments. From the ground up, the company designs, builds and operates communities containing housing, office space, commercial properties, schools, hospitals, parks and more. It is a practical solution to the growing demand for housing.
The company is able to achieve such a vision because it owns a large area of land. Since 2017, it has sold about $2 billion of its land portfolio, but the value of this portfolio is also… higher than it was before the sale due to high land prices.
Whether it's through rising land prices or by unlocking the value of that land through the development of master-planned communities, Howard Hughes has plenty of ways to win in the long run. Following the spin-off of its non-core assets, the company will become Community's only publicly traded, master-planned stock.
Historically, Howard Hughes' master-planned community assets have generated returns on equity of approximately 18% per annum. This should result in a price-to-book multiple well above 1.15, but it will take some time for that value to be achieved. Ackman appears willing to be patient with his 15% stake. Following in his footsteps seems promising. Just make sure you're in it for the long term.
Should you invest $1,000 in Howard Hughes now?
Before you buy shares in Howard Hughes, consider the following:
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Ryan Fanzo He has no position in any of the stocks mentioned. The Motley Fool has posts on and recommends Howard Hughes. The Motley Fool has Disclosure policy.
Billionaire investor Bill Ackman bets 15% of his entire portfolio on this No. 1 stock Originally published by The Motley Fool
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