Billionaire Bill Ackman, the founder and CEO of Pershing Square Capital Management, has garnered attention for his successes and failures in the investment world. With a track record that outperformed the S&P 500 by a significant margin, Ackman’s investment choices have become a worthwhile case study.
As of the June quarter, 37% of Ackman’s Pershing Square portfolio was invested in two stocks: Alphabet and Chipotle Mexican Grill. Both stocks have delivered impressive gains since Ackman first bought shares, outperforming the broader market. While Ackman reduced his positions in both companies during the quarter, his current asset allocation still reflects confidence in their potential.
Alphabet, the parent company of Google, reported solid financial results for the second quarter, with revenue increasing by 14% and GAAP net income jumping by 31%. However, the stock faced downward pressure due to a ruling that Alphabet violated antitrust laws by paying browser developers and smartphone makers to ensure Google’s default search option. Speculation about a possible breakup caused a temporary decline in Alphabet shares, but the company’s dominant position in the online search market and its expertise in search algorithms and artificial intelligence remain strong. Additionally, Alphabet’s cloud computing division is expected to be a significant growth driver as businesses invest in AI. Wall Street analysts anticipate a 16% annual earnings growth for Alphabet through 2026, making its current valuation reasonable.
Chipotle Mexican Grill also had a strong second quarter, with revenue increasing by 18% and non-GAAP net income jumping by 36%. The company’s focus on throughput and training has paid off, enabling it to meet strong demand trends and buck the contractionary trend in the broader restaurant industry. Chipotle’s commitment to responsibly sourced ingredients and its “food with integrity” philosophy have helped build brand authority and attract customers seeking a slightly healthier fast-casual option. Despite a recent decline in the stock following the announcement of CEO Brian Niccol’s departure, Wall Street analysts project a 17% annual earnings growth for Chipotle through 2026.
Investors interested in these companies may find the recent drawdown in their stock prices as an opportunity to buy shares. While Alphabet faces potential regulatory challenges, its dominant market position and strengths in AI and cloud computing make it a compelling investment. Chipotle’s focus on throughput and its brand authority in the fast-casual dining space continue to drive growth. However, investors should carefully consider the valuations of these stocks before making investment decisions.