Billionaire Bill Ackman Just Poured $2.2 Billion Into These 2 Incredible Stocks
Bill Ackman is happy to buy stocks when he believes they’re on sale, and he holds them until their prices reflect what he believes are their true values. That could be a few months or it could be a decade. For example, Ackman established a position in Chipotle Mexican Grill more than eight years ago, and it has grown to become one of the largest positions in the portfolio of his hedge fund, Pershing Square.
Over the last two quarters, Ackman has built two new significant positions for Pershing Square — Nike (NYSE: NKE) and Brookfield (NYSE: BN) — piling an estimated $2.2 billion into those stocks during the third quarter alone. Here’s why.
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Ackman bought about $275 million worth of Nike stock in the calendar year’s second quarter, but he loaded up in the calendar year’s third quarter after Nike’s fiscal 2024 fourth-quarter earnings results and fiscal 2025 outlook disappointed the market back in late June 2024. Ackman added 13.2 million shares, spending over $1 billion based on its average share price during the quarter.
Nike has struggled lately as it manages what share direct-to-consumer sales should be of overall sales. Cutting off wholesale distribution in favor of its own stores and website has worked in some quarters but is not working as well lately and it’s forcing management to adjust. As a result, there was a near-term drop in revenue as its sales through big retail partners dried up while Nike shifted inventory to its own channels. Sales came in worse than expected and revenue fell 10% year over year in Nike’s fiscal 2025 Q1. In reporting the results, management guided for a slow recovery in sales due to economic uncertainty.
It’s worth pointing out, however, that its gross margin improved by 1.2 percentage points in fiscal Q1 on the back of streamlined product and warehousing spending and strategic price improvements. As Nike improves its inventory management and returns to sales growth, it should see strong improvements in both gross margin and operating margin over time.
Nike’s price-to-sales ratio of about 2.3 is near its 10-year low. And while sales are currently moving in the wrong direction, there’s good reason to believe things will turn around. Nike has one of the strongest brands in the world, China still presents a growth opportunity for its business, and it has been able to maintain its premium pricing. With earnings growth expected to rebound after this year, Nike could be a great stock to buy now and hold for several years while it works through its business model transition.
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