Latest news with #HowardHughesHoldings
Yahoo
02-06-2025
- Business
- Yahoo
Billionaire Bill Ackman Wants to Be the Next Warren Buffett, and He Is Buying an AI Stock Up 855% in 10 Years (Hint: Not Nvidia)
Billionaire Bill Ackman will turn Howard Hughes Holdings into a modern-day Berkshire Hathaway in an effort to recreate Warren Buffett's success. Ackman's hedge fund Pershing Square Capital Management recently took a stake in Amazon, an artificial intelligence stock up 855% in the last decade. Amazon has three major growth opportunities in e-commerce, digital advertising, and cloud computing, and the company is using AI to boost revenue and improve margins. 10 stocks we like better than Amazon › In 1965, Warren Buffett took control of Berkshire Hathaway. He said that in hindsight it was a "doomed" textile mill "headed for extinction." But he saved the business, and laid the foundation for lasting growth, by shifting its focus to insurance. That brilliant decision created a steady inflow of investable capital in the form of insurance premiums, and Buffett used that cash to great effect over the years. Berkshire's market value has increased more than 5,500,000% since Buffett took control, for an average annual return of 20% over six decades. Buffett deserves much of the credit. He (along with the late Charlie Munger) engineered acquisitions, stock purchases, and share buybacks that ultimately turned Berkshire into a trillion-dollar business, one of only 11 in the world at this writing. While Buffett plans to step down as chief executive at Berkshire this year, billionaire Bill Ackman hopes to recreate his success with Howard Hughes Holdings. Ackman recently added another 900 million shares to his hedge fund, bringing his total ownership to 46.9%. He plans to turn Howard Hughes into a "modern-day version of Berkshire" by acquiring controlling interests in private and public companies. If Ackman succeeds, he could become the "next Warren Buffett." Here's the artificial intelligence stock he just bought. Bill Ackman ranks among the 20 most successful hedge-fund managers as measured by net gains, according to LCH Investments. And Pershing Square outperformed the S&P 500 (SNPINDEX: ^GSPC) by 24 percentage points over the last five years. Those accomplishments make Ackman an excellent source of inspiration. Importantly, he purchased three stocks during the first quarter: Hertz Global, Uber Technologies, and Brookfield Corporation. Those trades were disclosed in a Form 13F filed last month, but Pershing more recently added Amazon (NASDAQ: AMZN), an artificial intelligence (AI) stock that rocketed 855% over the last decade. Pershing's chief investment officer Ryan Israel said: "We felt that the company would be able to work through any slowdown in the cloud computing division Amazon Web Services, and we did not judge that tariffs would have a material impact on the earnings in the retail business." Interestingly, Ackman has a very concentrated portfolio that included fewer than a dozen stocks as of the first quarter. Chipmaker Nvidia was not one of those stocks. Amazon's market value exceeds $2 trillion today, but it could be much larger in a few years. The company has a strong presence in three growing industries, as detailed below: Not only does Amazon run the largest online marketplace in the U.S., but it also expects to gain market share this year. Domestic retail e-commerce sales are forecast to increase 8% annually through 2028, according to eMarketer. Amazon is the third-largest adtech company in the world and is rapidly taking share from industry leaders Google (part of Alphabet) and Meta Platforms. Retail ad spending is forecast to increase 17% annually in the U.S. through 2028, according to eMarketer. Amazon Web Services (AWS) is the largest public cloud operator, as measured by infrastructure and platform services spending. Cloud computing sales are forecast to grow at 20% annually through 2030, according to Grand View Research. Importantly, retail advertising and cloud services revenues not only are growing faster than online retail sales, but also have higher margins. That will make Amazon more profitable over time. But the company is also developing about 1,000 generative AI applications that will improve productivity and efficiency across its retail business, from front-end tasks like customer service to back-end tasks like coding. AWS is ideally positioned to monetize AI. It already operates the largest public cloud as measured by revenue and customers, but it has also introduced new products at all three layers of the computing stack. That includes custom chips for AI training and inference at the infrastructure layer, AI-model development tools like Bedrock at the platform layer, and AI applications like Amazon Q at the software layer. That three-tiered strategy is paying off. CEO Andy Jassy recently told analysts: "Our AI business has a multibillion-dollar annual revenue run rate," and "continues to grow triple-digit year-over-year percentages." Amazon shares soared 855% over the last decade as the company built strong positions in online retail, digital advertising, and cloud computing. And Wall Street is still predominantly bullish. Among the 71 analysts who follow the company, 96% rate the stock a buy, and the median target price is $235 per share, which implies 14% upside from the current share price of $205. Wall Street expects Amazon's earnings to increase at 10% annually through 2026. That makes the current price-to-earnings (P/E) ratio of 33 look somewhat expensive. But I think analysts are underestimating the company, as they have in the past -- Amazon topped the consensus earnings estimate by an average of 21% during the last six quarters. Long-term investors should feel comfortable buying a small position today. Before you buy stock in Amazon, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the for investors to buy now… and Amazon wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you'd have $651,049!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $828,224!* Now, it's worth noting Stock Advisor's total average return is 979% — a market-crushing outperformance compared to 171% for the S&P 500. Don't miss out on the latest top 10 list, available when you join . See the 10 stocks » *Stock Advisor returns as of May 19, 2025 John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. Trevor Jennewine has positions in Amazon and Nvidia. The Motley Fool has positions in and recommends Alphabet, Amazon, Berkshire Hathaway, Brookfield, Brookfield Corporation, Howard Hughes, Meta Platforms, Nvidia, and Uber Technologies. The Motley Fool has a disclosure policy. Billionaire Bill Ackman Wants to Be the Next Warren Buffett, and He Is Buying an AI Stock Up 855% in 10 Years (Hint: Not Nvidia) was originally published by The Motley Fool Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
02-06-2025
- Business
- Yahoo
Billionaire Bill Ackman Wants to Be the Next Warren Buffett, and He Is Buying an AI Stock Up 855% in 10 Years (Hint: Not Nvidia)
Billionaire Bill Ackman will turn Howard Hughes Holdings into a modern-day Berkshire Hathaway in an effort to recreate Warren Buffett's success. Ackman's hedge fund Pershing Square Capital Management recently took a stake in Amazon, an artificial intelligence stock up 855% in the last decade. Amazon has three major growth opportunities in e-commerce, digital advertising, and cloud computing, and the company is using AI to boost revenue and improve margins. 10 stocks we like better than Amazon › In 1965, Warren Buffett took control of Berkshire Hathaway. He said that in hindsight it was a "doomed" textile mill "headed for extinction." But he saved the business, and laid the foundation for lasting growth, by shifting its focus to insurance. That brilliant decision created a steady inflow of investable capital in the form of insurance premiums, and Buffett used that cash to great effect over the years. Berkshire's market value has increased more than 5,500,000% since Buffett took control, for an average annual return of 20% over six decades. Buffett deserves much of the credit. He (along with the late Charlie Munger) engineered acquisitions, stock purchases, and share buybacks that ultimately turned Berkshire into a trillion-dollar business, one of only 11 in the world at this writing. While Buffett plans to step down as chief executive at Berkshire this year, billionaire Bill Ackman hopes to recreate his success with Howard Hughes Holdings. Ackman recently added another 900 million shares to his hedge fund, bringing his total ownership to 46.9%. He plans to turn Howard Hughes into a "modern-day version of Berkshire" by acquiring controlling interests in private and public companies. If Ackman succeeds, he could become the "next Warren Buffett." Here's the artificial intelligence stock he just bought. Bill Ackman ranks among the 20 most successful hedge-fund managers as measured by net gains, according to LCH Investments. And Pershing Square outperformed the S&P 500 (SNPINDEX: ^GSPC) by 24 percentage points over the last five years. Those accomplishments make Ackman an excellent source of inspiration. Importantly, he purchased three stocks during the first quarter: Hertz Global, Uber Technologies, and Brookfield Corporation. Those trades were disclosed in a Form 13F filed last month, but Pershing more recently added Amazon (NASDAQ: AMZN), an artificial intelligence (AI) stock that rocketed 855% over the last decade. Pershing's chief investment officer Ryan Israel said: "We felt that the company would be able to work through any slowdown in the cloud computing division Amazon Web Services, and we did not judge that tariffs would have a material impact on the earnings in the retail business." Interestingly, Ackman has a very concentrated portfolio that included fewer than a dozen stocks as of the first quarter. Chipmaker Nvidia was not one of those stocks. Amazon's market value exceeds $2 trillion today, but it could be much larger in a few years. The company has a strong presence in three growing industries, as detailed below: Not only does Amazon run the largest online marketplace in the U.S., but it also expects to gain market share this year. Domestic retail e-commerce sales are forecast to increase 8% annually through 2028, according to eMarketer. Amazon is the third-largest adtech company in the world and is rapidly taking share from industry leaders Google (part of Alphabet) and Meta Platforms. Retail ad spending is forecast to increase 17% annually in the U.S. through 2028, according to eMarketer. Amazon Web Services (AWS) is the largest public cloud operator, as measured by infrastructure and platform services spending. Cloud computing sales are forecast to grow at 20% annually through 2030, according to Grand View Research. Importantly, retail advertising and cloud services revenues not only are growing faster than online retail sales, but also have higher margins. That will make Amazon more profitable over time. But the company is also developing about 1,000 generative AI applications that will improve productivity and efficiency across its retail business, from front-end tasks like customer service to back-end tasks like coding. AWS is ideally positioned to monetize AI. It already operates the largest public cloud as measured by revenue and customers, but it has also introduced new products at all three layers of the computing stack. That includes custom chips for AI training and inference at the infrastructure layer, AI-model development tools like Bedrock at the platform layer, and AI applications like Amazon Q at the software layer. That three-tiered strategy is paying off. CEO Andy Jassy recently told analysts: "Our AI business has a multibillion-dollar annual revenue run rate," and "continues to grow triple-digit year-over-year percentages." Amazon shares soared 855% over the last decade as the company built strong positions in online retail, digital advertising, and cloud computing. And Wall Street is still predominantly bullish. Among the 71 analysts who follow the company, 96% rate the stock a buy, and the median target price is $235 per share, which implies 14% upside from the current share price of $205. Wall Street expects Amazon's earnings to increase at 10% annually through 2026. That makes the current price-to-earnings (P/E) ratio of 33 look somewhat expensive. But I think analysts are underestimating the company, as they have in the past -- Amazon topped the consensus earnings estimate by an average of 21% during the last six quarters. Long-term investors should feel comfortable buying a small position today. Before you buy stock in Amazon, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the for investors to buy now… and Amazon wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you'd have $651,049!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $828,224!* Now, it's worth noting Stock Advisor's total average return is 979% — a market-crushing outperformance compared to 171% for the S&P 500. Don't miss out on the latest top 10 list, available when you join . See the 10 stocks » *Stock Advisor returns as of May 19, 2025 John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. Trevor Jennewine has positions in Amazon and Nvidia. The Motley Fool has positions in and recommends Alphabet, Amazon, Berkshire Hathaway, Brookfield, Brookfield Corporation, Howard Hughes, Meta Platforms, Nvidia, and Uber Technologies. The Motley Fool has a disclosure policy. Billionaire Bill Ackman Wants to Be the Next Warren Buffett, and He Is Buying an AI Stock Up 855% in 10 Years (Hint: Not Nvidia) was originally published by The Motley Fool Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
26-05-2025
- Business
- Yahoo
3 Stocks That Could Be Like Buying Berkshire Hathaway In the 1980s
Markel has a business model that is very similar to Berkshire but is far smaller. Billionaire investor Bill Ackman aims to turn Howard Hughes Holdings into a "modern-day" Berkshire. Kinsale Capital Management isn't quite a Berkshire-like business model today, but it could become more like it over time. 10 stocks we like better than Markel Group › Berkshire Hathaway (NYSE: BRK.A)(NYSE: BRK.B) has produced amazing returns for long-term investors under Warren Buffett's leadership. However, at a more than $1 trillion valuation, its ability to consistently generate outsize returns from here is somewhat limited. To put Berkshire's success into perspective, if you had invested $10,000 in Berkshire Hathaway 40 years ago in 1985, you would have nearly $4.1 million today. And that's if you had bought shares two decades after Warren Buffett took the reins and started building the company into what it is today. Of course, Berkshire's long-term track record will be tough to match. But there are a few companies that have some of the right components in place to grow into a much larger value-creation machine like Berkshire, and here are three in particular that are worth a closer look right now. The most obvious "early Berkshire Hathaway" is specialty insurance company Markel (NYSE: MKL), which is roughly 2% of Berkshire's size by market cap and uses a similar business model. At the core is Markel's insurance business, and its focus on specialty insurance gives it the potential for superior profitability. There's also Markel Ventures, which acquires entire operating businesses, and because of the company's relatively small size, it doesn't need to make billion-dollar acquisitions to potentially move the needle. After all, Buffett has said many times that his biggest obstacle to finding great and meaningful targets is Berkshire's massive size. Then there is Markel's third focus, which is a portfolio of publicly traded stocks, the top holding in which happens to be Berkshire Hathaway. So all three parts of the business are similar in nature to how Berkshire is structured. Markel's recent results have been strong, and there's a solid case to be made that the stock is undervalued. Over the past five years, Markel's intrinsic value has grown by nearly 130% but the stock is up by less than half of that amount. Management is in the process of a strategic review to optimize the business, so now could be a great time to take a look. Howard Hughes Holdings (NYSE: HHH) has been around for about 15 years, and its core business is developing master-planned communities, or MPCs. These are large-scale developments that are the size of small cities, with examples of Howard Hughes' MPC including The Woodlands near Houston and Summerlin in the Las Vegas area. Recently, billionaire hedge fund manager Bill Ackman has been pushing to take the company in a different direction. While he has believed in the MPC business for a long time (he owned 37% of the company previously), Ackman recently invested an additional $900 million in Howard Hughes and became the company's executive chairman for the purpose of acquiring entire businesses with the goal of building a "modern-day Berkshire Hathaway." It's unclear exactly what this will look like, and right now all Howard Hughes has is a $900 million war chest, so it's in the very early stages of conglomerate building. However, what we do know is that the current MPC business and its leadership team will remain as-is, and that Ackman has said that an insurance business will likely play a big role in the future plans. To be fair, I bought Howard Hughes stock for the MPC business, long before Ackman's plans were revealed. But this certainly creates some interesting possibilities, and right now retail investors can buy shares for about 35% less than Ackman just did. One that's a little less obvious of a choice is Kinsale Capital Group (NYSE: KNSL), an insurance company that focuses on specialty insurance for smaller clients. And the main reason is that Kinsale has a tremendously profitable insurance business that should give it plenty of capital and operational flexibility to invest in more unique ways as the business grows. Specialty insurance -- that is, special situations and hard-to-assess risks -- is a tough business. But if you're good at it, there is lots of money to be made. Most insurance companies are happy to generate a single-digit profit margin from underwriting and to make the bulk of their money from investment income. But Kinsale is different. The company has a long track record of best-in-class profitability. In fact, in 2024 Kinsale produced a 76.4% combined ratio, which implies an underwriting profit of nearly 24%. For clarification, Kinsale hasn't expressed interest in building a true conglomerate with non-insurance subsidiaries. However, management had said that as the company scales and its investment portfolio grows, the team is comfortable taking on more exposure to equities. And the incredible underwriting margins from the insurance business give it flexibility to not have to completely focus on immediate income from its investments. I completely acknowledge that Kinsale is the least Berkshire-like business on this list. But I also believe that in 10 years, it will have a significantly more Buffett-style approach to its investment strategy. To be perfectly clear, I don't think there will ever be another Berkshire Hathaway, at least in the sense that one of today's emerging conglomerate will produce 5,500,000% total returns (that's not a typo) over a 60-year period. However, Berkshire Hathaway uses a very replicable method of conglomerate-building, and it can certainly be used to create outsized returns over the years. So while I don't think these three will turn a few thousand dollars into millions of dollars, I think all three are excellent businesses, and I own all three in my own stock portfolio. Before you buy stock in Markel Group, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the for investors to buy now… and Markel Group wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you'd have $639,271!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $804,688!* Now, it's worth noting Stock Advisor's total average return is 957% — a market-crushing outperformance compared to 167% for the S&P 500. Don't miss out on the latest top 10 list, available when you join . See the 10 stocks » *Stock Advisor returns as of May 19, 2025 Matt Frankel has positions in Berkshire Hathaway, Howard Hughes, Kinsale Capital Group, and Markel Group. The Motley Fool has positions in and recommends Berkshire Hathaway, Howard Hughes, Kinsale Capital Group, and Markel Group. The Motley Fool has a disclosure policy. 3 Stocks That Could Be Like Buying Berkshire Hathaway In the 1980s was originally published by The Motley Fool Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
21-05-2025
- Business
- Yahoo
Billionaire Bill Ackman May Be the Next Warren Buffett, and 33% of His Portfolio Is Invested in 2 Brilliant Stocks
Hedge fund manager Bill Ackman hopes to emulate Warren Buffett by turning Howard Hughes Holdings into a "modern-day Berkshire Hathaway." Ackman's hedge fund, Pershing Square Capital Management, currently has 33% of its portfolio invested in two stocks: Uber and Alphabet. Uber is uniquely positioned to benefit from autonomous driving technology, and the stock looks attractive at its current valuation. 10 stocks we like better than Uber Technologies › Warren Buffett took control of Berkshire Hathaway in 1965 and turned the textile mill into a holding company. He promptly diversified into insurance to create a steady stream of investable cash in the form of premium payments. Buffett used that capital to buy stocks and acquire businesses, turning Berkshire into a trillion-dollar company in the process. Billionaire Bill Ackman wants to recreate that success with Howard Hughes Holdings. His hedge fund had $1.4 billion invested in the stock as of March, and Ackman in added another $900 million in May. He plans to use Howard Hughes as a vehicle to create a "modern-day Berkshire Hathaway" by purchasing controlling interests in quality companies. Ackman is already highly visible in the financial world. His hedge fund, Pershing Square Capital, beat the S&P 500 (SNPINDEX: ^GSPC) by nearly 30 percentage points over the last five years. So Ackman could become the next Buffett if he turns Howard Hughes into a diversified Berkshire-like business. Meanwhile, Ackman has 33% of his hedge fund invested in two brilliant stocks: 19% in Uber Technologies (NYSE: UBER) and 14% in Google-parent Alphabet (NASDAQ: GOOGL) (NASDAQ: GOOG). That both stocks account for such large percentages of the total portfolio shows conviction. Here's what investors should know. Uber is a leader in mobility and food delivery services. It operates the largest ride-sharing platform and second largest restaurant food delivery platform in the U.S. in terms of sales. It also ranks as the largest ride-sharing platform in nine other countries, and the largest food-delivery platform in eight countries. That scale affords Uber important advantages. First, Uber can cross-promote its own products because it provides mobility and delivery services through a single mobile app, and the company is executing: 30% of first delivery trips come from mobility users, and 22% of first mobility trips come from delivery users. Second, Uber benefits from a strong network effect, meaning its platform becomes more valuable to consumers with each new driver (and vice versa). Third, Uber collects a tremendous amount of data because of its scale. It uses that information to continuously improve its ability to dispatch drivers, route rides, and set prices. That data has also given rise to a booming advertising business. Uber can use what it knows about consumer delivery habits to help brands target ad campaigns on its mobile app. Fourth, Uber is uniquely positioned to help autonomous driving companies bring robotaxis to market because it already operates the largest ride-sharing platform in the world. CEO Dara Khosrowshahi says autonomous driving technology will unlock a trillion-dollar opportunity in the U.S. alone, and Uber is already making moves to capitalize. It recently partnered with WeRide to bring robotaxis to Abu Dhabi and soon Dubai, and they will expand to 15 new cities (including some in Europe) during the next five years. Uber has also partnered with Alphabet's Waymo in Phoenix, Austin, and Atlanta. Waymo robotaxis just launched in Austin and strong initial results could lead to a further collaboration with Uber in the U.S. Uber estimates adjusted EBITDA will increase 32% in the second quarter, and management has guided for similar results through 2026. That means adjusted earnings should increase at roughly the same pace, which makes the current valuation of 16 times earnings look very reasonable. Patient investors should feel comfortable buying a position in this stock today. Alphabet is the largest ad tech company in the world because of its ability engage internet users and source data through platforms like Google Search and YouTube. The search market is undoubtedly shifting toward artificial intelligence (AI) tools, and competitors like Perplexity and ChatGPT are a potential threat. But Alphabet is leaning into that opportunity with its own generative AI overviews. Alphabet also runs the third largest public cloud in terms of infrastructure and platform services (CIPS). Google Cloud accounted for 12% of total CIPS spending in the first quarter, up a percentage point from the same quarter last year but flat sequentially. As a recognized leader in AI infrastructure and large language models, the company could keep gaining market share as AI demand increases. Importantly, Alphabet is currently involved in two antitrust lawsuits brought by the Justice Department that could lead to a breakup, meaning the company may have to sell certain assets. Judges have already ruled against Alphabet in both lawsuits and the cases have now moved to the remediation phase. Most analysts think the courts will stop short of breaking up the business, but investors should be aware of the risk. Wall Street estimates Alphabet's earnings will increase at 7% annually through 2026. That makes the current valuation of 18 times earnings look reasonable, especially because the company beat the consensus earnings estimate by an average of 14% during the last six quarters and similar outperformance is plausible in future quarters. The ad tech and cloud services markets are projected to grow at 14% annually and 20% annually, respectively, through 2030. Alphabet is losing market share in digital advertising, but YouTube and Google Search are still two of the most engaging web properties. And the company is gaining share in cloud services. If it maintains that momentum, earnings could grow faster than expected. Before you buy stock in Uber Technologies, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the for investors to buy now… and Uber Technologies wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you'd have $642,582!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $829,879!* Now, it's worth noting Stock Advisor's total average return is 975% — a market-crushing outperformance compared to 172% for the S&P 500. Don't miss out on the latest top 10 list, available when you join . See the 10 stocks » *Stock Advisor returns as of May 19, 2025 Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Trevor Jennewine has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Berkshire Hathaway, Howard Hughes, and Uber Technologies. The Motley Fool has a disclosure policy. Billionaire Bill Ackman May Be the Next Warren Buffett, and 33% of His Portfolio Is Invested in 2 Brilliant Stocks was originally published by The Motley Fool Sign in to access your portfolio
Yahoo
21-05-2025
- Business
- Yahoo
Could Buying This $4.1 Billion Stock Be Like Buying Berkshire Hathaway in 1965?
Buffett took over a failing textile business called Berkshire Hathaway in 1965. He bought it because he felt its net asset value exceeded its stock price. Another billionaire just took a similar opportunity in today's market. 10 stocks we like better than Howard Hughes › When Warren Buffett started buying shares of Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B) in 1962, it was a failing textile business. The appeal for Buffett wasn't Berkshire's business -- it was that its book value far exceeded its stock price. Although he planned to sell the shares in 1964, a disagreement with management led him to angrily buy up more shares of the stock and take over the struggling company in 1965. During the next 60 years, Buffett turned Berkshire Hathaway into one of the most valuable companies in the world, exceeding a valuation of $1 trillion. Today, investors may have an opportunity to follow another famous investor into a company trading below the value of its assets. Bill Ackman's Pershing Square investment fund has struck a deal with Howard Hughes Holdings (NYSE: HHH) to acquire a significant stake in the business and make Ackman its executive chairman. Ackman plans to use the business's cash flows to turn it into a diversified holding company, a la Berkshire Hathaway. Should investors follow Ackman into Howard Hughes? Howard Hughes Holdings is a real estate company that specializes in master-planned communities. It buys big plots of land, parcels them out to developers, and builds commercial properties and multifamily units around the developments. The business has benefited from the tailwind of rising land prices, but that's been more than offset by pressure on commercial office valuations and rising interest rates. As of the end of September, management estimated its net asset value at $5.85 billion against a market value of $4.1 billion. Ackman's investment of $900 million dilutes the existing shares a bit, but adds that cash to the company's balance sheet. Ackman's price of $100 per share is still a premium to the current stock price, but a discount relative to management's estimate of its net asset value. What Ackman gets in exchange is an increase in Pershing Square's stake in the company to 46.9%, and a 40% share of the voting power. He takes over as executive chairman, a position he stepped down from last May, and Pershing Square's chief investment officer will be in charge of managing Howard Hughes' investment portfolio. Pershing Square will also receive a quarterly fee of $3.75 million, plus 0.375% of the increase in the company's market cap in excess of inflation. Importantly, Ackman gets a platform to start building a publicly traded holding company. He said one of the first steps it will take is to acquire or build an insurance business, which provides access to investable capital thanks to float, or the money an insurer collects in premiums before paying out policy claims. It's the foundation of Berkshire Hathaway, and it could be the foundation of Ackman's Howard Hughes. Ackman is widely respected as an investor. He's often seen as an activist investor, using his influence to press for change in businesses and unlock shareholder value. However, he's also been more than happy to buy a great company when its stock has been unduly beaten down and just wait for the price to return to its fair value. That latter approach is very Buffett-like. He's also comfortable using leverage to increase equity exposure. Berkshire Hathaway has access to low-cost leverage because it operates an insurance business. It's historically used the float to invest, expecting the underwriting business to perform profitably in most years. If Ackman develops an insurance business within Howard Hughes, he could similarly access capital through its float on top of the cash flow generated by the real estate business. Going against the new Howard Hughes is the significant fee Pershing Square will collect to manage the investment portfolio. Buffett didn't take a fee when he took over Berkshire, and he kept his salary relatively low throughout his career. His compensation was the increase in value of his share of the company. The real question for investors is whether Ackman can manage to be nearly as successful as Buffett if he follows the same playbook. Unfortunately, the answer is probably no. Competition in the market is much more intense today than in Buffett's early days, so the odds of Ackman being able to replicate anything that looks like Berkshire's returns seems unlikely. Still, average investors who want to invest alongside Ackman now have an opportunity. And Howard Hughes looks like it offers good value at today's price, especially when you consider someone like Ackman was willing to pay a significant premium for the shares. Before you buy stock in Howard Hughes, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the for investors to buy now… and Howard Hughes wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you'd have $642,582!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $829,879!* Now, it's worth noting Stock Advisor's total average return is 975% — a market-crushing outperformance compared to 172% for the S&P 500. Don't miss out on the latest top 10 list, available when you join . See the 10 stocks » *Stock Advisor returns as of May 19, 2025 Adam Levy has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Berkshire Hathaway and Howard Hughes. The Motley Fool has a disclosure policy. Could Buying This $4.1 Billion Stock Be Like Buying Berkshire Hathaway in 1965? was originally published by The Motley Fool Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
