Billionaire Bill Ackman runs Pershing Square Capital Management, a hedge fund that returned 234% over the last five years, crushing the 95% total return in the S&P 500. Pershing Square also beat the benchmark index over the last year and the last decade. That outperformance makes Ackman and his fund a worthwhile case study for investors.
A closer look at the fund in the September quarter shows that Ackman had 31.4% of Pershing Square’s portfolio invested in two stocks: 17.4% in Alphabet (NASDAQ: GOOGL) (NASDAQ: GOOG), split between Class A and Class C shares, and another 14% in Lowe’s (NYSE: LOW). That level of investment suggests Ackman has a great deal of confidence in the ability of these two companies to create shareholder value.
Here’s what investors should know about these brilliant stocks.
1. Alphabet
Alphabet reported solid results in the fourth quarter, beating estimates on the top and bottom lines. Revenue growth accelerated to 13% year over year on its strength in cloud computing, and generally accepted accounting principles (GAAP) earnings per share soared 56% due to cost control efforts and share repurchases. The stock still moved lower following the report because advertising revenue narrowly missed expectations, but Alphabet remains well-positioned to create value for shareholders.
Alphabet subsidiary Google is the largest adtech company in the world. It accounted for 39% of global digital advertising revenue in 2023, more than doubling the market share of its closest competitor, according to Statista. That dominance is a product of its ability to engage internet users and source data through some of the most prolific web properties and platforms in the world, including Google Search, YouTube, Android, and Chrome.
Google also has a reasonably strong presence in cloud computing. It accounted for 11% of global cloud infrastructure and platform services spending in the fourth quarter, up from 10% one year ago and 9% two years ago. Product innovation and improved go-to-market capabilities have been the impetus behind those share gains, and investors have…
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