Billionaire Bill Ackman Says to Stick to High-Quality Stocks; Here are 2 names he likes


There has been no respite for the markets since Fed Chairman Jerome Powell took to the podium in Jackson Hole and suggested the central bank would do whatever it had to do to rein in the inflation, and if more rate hikes were needed, so be it.

The market may have received a case of heebee jeebees in response, but it’s a plan that billionaire hedge fund manager Bill Ackman says will work. By next year, the CEO and founder of Pershing Square Capital expects inflation to be at least halved.

In the meantime, Ackman offers proven advice for those wondering how to handle tough conditions. “We believe that at the end of the day, if you own big businesses, you can go through a tough time like this,” Ackman explained. “Our biggest fear was inflation and that’s why I wanted the Fed to raise rates quickly and quickly.”

So let’s look at the details of two stocks that make up a large portion of Pershing’s $7.46 billion portfolio. Clearly, Ackman views them as quality stocks, but he’s not the only one who trusts these names; according to TipRanks databaseWall Street analysts rate both as strong buys.

Howard Hughes Society (HHC)

We’ll start with real estate company The Howard Hughes Corporation, a developer of “planned communities” (MPC). HHC manages every part of the community, from strategic development to bespoke business asset management. It does this through three main business segments: MPCs, Strategic Developments and Operating Assets. By using a synergistic strategy, HHC is able to control the cash flow of the entire company, which ultimately promotes a constant cycle of value creation.

It’s a trading strategy that seems to be working, even in the face of tough macro conditions. Despite the economic slowdown, soaring inflation and fears of a recession, the company released an excellent report for the second quarter.

Net income for the second quarter reached $21.6 million, translated to $0.42 per diluted share compared to net income of $4.8 million – $0.09 per diluted share – in the same quarter a year ago. one year old. The figure also easily beat analysts’ expected loss of 39 cents per share. The turnover also improved expectations. Revenue rose about 30% year-over-year to $276.71 million, somewhat beating analysts’ forecast of $203.7 million.

It’s the kind of performance that will no doubt please Ackman, whose Pershing fund owns 26.5% of HHC. She currently owns 13,620,164 shares, valued at 862.56 million at the current share price.

Also taking a decidedly positive stance, the BMO analyst Jean-Kimwhich finds plenty of reason to back the property company, while noting that the stock’s performance in 2022 (down 38%) is not indicative of the company’s prospects.

“HHC offers investors a unique inroad into the real estate market as the largest public Master Planned Community (MPC) developer and operator in major U.S. MSAs. HHC should benefit from attractive fundamentals due to a favorable imbalance between supply and demand for housing that is expected to continue to support housing prices,” Kim noted.

“We believe the year-to-date underperformance is disproportionately correlated to homebuilder performance, as HHC benefits from recurring NOI (net operating income) through its business assets and flows. of cash from condo sales, and as such its current market price creates an attractive risk-reward profile for investors,” the analyst added.

As a result, Kim rates HHC an outperformer (i.e. a buy) while her price target of $90 leaves room for a 12-month stock appreciation of around 42%. (To see Kim’s track record, Click here)

Joining Ackman and Kim in the bullish camp, Street’s other 3 recent reviews are positive, making the consensus here a Strong Buy. Forecasts call for year-over-year gains of around 52%, given the average target clocks at $96. (See HHC stock forecast on TipRanks)

Lowes (DOWN)

Then we have renowned home improvement specialist Lowe’s. What started as a single hardware store in North Carolina in 1921 has grown into one of the largest home improvement retailers in the world – in fact, it’s second only to Home Depot both nationally and internationally. At the start of the year, the company had 1,971 DIY and hardware stores under its umbrella; Lowe’s boasts that it is well positioned to continue to take part in the $900 billion home improvement industry.

In addition to the current usual range of macroeconomic problemsrising inflation and the possibility of a recessionimpacting consumer behavior, Lowe’s business has been impacted by shifting priorities in the post-pandemic era. After demand soared during the pandemic as consumers used stay-at-home mandates to spruce up their homes, more money is now being spent on out-of-home activities. Thus, the short-term demand for DIY products in certain segments has decreased.

This was evident in the company’s latest quarterly report – for 2Q22. Revenue fell 0.3% year over year to $27.48 billion, missing Street’s expectations of $680 million. That said, the company managed the profitability profile well; EPS climbed 9.8% year-over-year to $4.67, while beating analysts’ expectation of $4.58.

Ackman remains long and strong and made no changes to his stance during the quarter. Pershing currently owns 10,207,306 shares worth about $1.97 billion, which represents almost 24% of his fund’s portfolio.

Q2 Print Scan, Truist Analyst Scottish Ciccarelli isn’t concerned about the slowdown in DIY sales and feels the business is doing well.

“We believe DIY sales of 2Q22 (and 1H22 as a whole) have been heavily impacted by tough comparisons and this year’s shortened spring season, leading the company to expect a low-end +/- 1% for the year,” said the 5-Star Analyst Explanation. “However, thanks to productivity initiatives, EBIT margins actually increased despite the revenue shortfall, and earnings are expected to be in the high end of their forecast of $13.10 to $13.60.”

“Overall, we think trends remain solid, DIY sales are starting to turn positive, profitability remains well controlled and we think the stock could continue to revalue higher in late 22/early 23 if trends persist as expected,” Ciccarelli summarized.

To that end, Ciccarelli has a Buy rating on the stock LOW, backed by a price target of $263. The implication for investors? Upside potential of 34% from current levels. (To see Ciccarelli’s prize list, Click here)

Looking at the consensus breakdown, with 15 buys dominating 5 holds, the stock boasts a strong buy consensus rating. The average price target stands at $241.35, indicating that the stock has room for growth of 23% over the coming year. (See BAS stock forecast on TipRanks)

To find great ideas for stocks trading at attractive valuations, visit TipRanks’ Best stocks to buya recently launched tool that brings together all information about TipRanks stocks.

Disclaimer: Opinions expressed in this article are solely those of the featured analysts. The Content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


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