Bill Ackman: Pershing Square Capital Has $900 Million Stake in Starbucks

Pershing Square Capital’s Bill Ackman revealed that the hedge fund has a stake worth approximately $900 million in Starbucks. Following word of the hedge fund’s stake, shares of Starbucks jumped and closed Tuesday 2% higher.

The stake that Ackman has averaged $51 per share in cost, which means, the hedge fund is already 13% up on its investment.

Ackman said that if same store sales and the valuation revert more closely to their historic averages levels, Starbuck shares could double over the upcoming three years.

Ackman called China Starbucks’ single biggest growth opportunity. The hedge fund manager also noted that the current Starbucks two-year repurchase of shares plan represents over 20% of the market value of the company.

In August, Ackman said the fund took a new position that represented about 10% of the overall portfolio which appears to have been Starbucks. Fund disclosed its new stakes in Lowe’s Cos. and United Technologies at that time.

Pershing holds shares in restaurants with stakes in Restaurant Brands International, which is the parent company of Burger King and Tim Horton’s, Mondelez and Chipotle Mexican Grill.

The hedge fund has attempted to make a turnaround of fortune after a number of years of less than stellar performance and several high profile public spats. Since its 2015 peak of $20 billion, the fund has lost over half its assets due to investors fleeing poor returns amidst a bull market.

The fund was highly successful with its investment in Chipotle this year where it is the company’s second largest shareholder. The burrito maker’s shares are up over 55%. It made $100 million of profit from a stake it sold in Nike earlier in 2018.

At the same time, Starbucks has struggled with weaker sales in the U.S. for the last several quarters. It hoped that offering more cold beverages along with new lunch menu items would entice people to its cafes. However, the coffeehouse giant has been forced to scale back store growth and close several underperforming locations in areas that are densely populated.

Starbucks usually shutters approximately 50 stores each year, but is expecting to close 150 in 2019. The company is also planning to lower the number of new licensed locations by 100 in 2019.

The stock has remained nearly flat for the current year to date.

Through the end of September, Pershing Square was holding $8.3 billion in assets and an increase of 15.8% in net performance.

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