We recently published a list entitled Billionaire Bill Ackman’s 2024 Portfolio: 6 Best Stocks to Buy in 2024. Since Restaurant Brands International Inc. (NYSE:QSR) ranks 3rd in the list, it deserves a deeper look.
Billionaire Bill Ackman recently made headlines after reports suggested he plans to take his investment firm public as soon as next year. A Wall Street Journal report said the 58-year-old billionaire was selling a stake in Pershing Square to investors as part of a funding round that could value the firm at about $10.5 billion. According to data from WSJ, Pershing Square managed over $16 billion in assets as of the end of April. The publication said Ackman has told investors that he plans to at least quadruple assets under management.
Ackman has run a concentrated portfolio for years. As of the end of the March quarter this year, his portfolio was worth over $10 billion, with just seven stocks. And yet Ackman made $610 million last year, coming in at the seventh position in Bloomberg’s annual list of the best-paid hedge fund founders.
In 2022, Ackman, who writes long and fiery posts on Twitter, announced that he was done with activist investing and was taking a “quieter approach.” In 2023, Pershing Square Holdings generated strong NAV performance of 26.7% versus 26.3% for its principal benchmark, the S&P 500 index.
Ackman talked in detail about the fund’s returns and future strategy during his 2023 letter to investors:
“While our investments in hedging and asymmetric instruments have been enormously profitable, we could have done better. In each of the three black swan events of the last 20 years, we had an early and highly variant view of the likely impact and probability of their occurrence and had identified and invested in instruments that offered profits many times their cost. In retrospect, we should have invested more and achieved even greater profits without risking materially more capital.”
For this article we scanned Ackman’s Q1 portfolio and picked his top six stock holdings. Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
Restaurant Brands International Inc. (NYSE:QSR)
Billionaire Bill Ackman’s Q1’2024 Stake Value: $1,855,009,326
Billionaire Ackman owns a $1.85 billion stake in Restaurant Brands International Inc. (NYSE:QSR) as of the end of the first quarter of 2024. Pershing Square expressed its confidence in Restaurant Brands International Inc.’s (NYSE:QSR) management in its 2023 letter to investors and explained its rationale behind holding on to the stock:
In our view, this is the crown jewel of the company, as it is a pure franchised royalty business, with a decades-long opportunity for unit growth. In 2023, QSR’s international business generated systemwide sales growth of 18% and operating income growth of 15%, despite temporary weakness in some markets. The international business comprises nearly half of QSR’s restaurants and nearly a third of its operating income, a strong source of long-term growth and profitability for the company. Despite economic weakness in China, we expect unit growth will be higher in 2024 than 2023 and will eventually return to the company’s historic 5%+ growth rate. While QSR has made substantial progress across its brands, it still trades at a discount to its intrinsic value and its peers, which have lower long-term growth potential.
Read the full letter here.
Restaurant Brands International Inc. (NYSE:QSR) operates over 31,000 restaurants worldwide. It’s behind some of the world’s most famous restaurants, including TIM HORTONS®, BURGER KING®, POPEYES® and FIREHOUSE SUBS. Another solid reason to own Restaurant Brands International Inc. (NYSE:QSR) is its dividend. The company’s dividend yield stands at 3.26% as of June 7. Restaurant Brands International Inc. (NYSE:QSR) has increased its dividend for 10 consecutive years. Restaurant Brands International Inc. (NYSE:QSR) has increased its earnings at a CAGR of 28% over the past nine years. In the first quarter the company saw a 4.6% jump in comps growth. The stock is trading at a forward P/E ratio of 18.22, which is attractive compared to peers and in the context of the growth Restaurant Brands International Inc. (NYSE:QSR) is posting. The company’s earnings are expected to grow 13.70% in 2025.
Pershing Square Holdings stated the following regarding Restaurant Brands International Inc. (NYSE:QSR) in its fourth quarter 2023 investor letter:
“Restaurant Brands International Inc.’s (NYSE:QSR) franchised business model is a high-quality, capital-light, growing annuity that generates high-margin brand royalty fees from its four leading brands: Burger King, Tim Hortons, Popeyes, and Firehouse Subs. Since Patrick Doyle joined as Executive Chairman in November 2022, QSR has announced various strategic initiatives and begun providing investors with more details about the business. Coupled with significant investments over the last few years to drive more consistent growth across each of its brands, QSR has entered a new era of what we believe will be consistently stronger performance.
In February, the company hosted an investor day and introduced a five-year growth outlook comprising 3%+ annual comparable sales and 5%+ net restaurant growth, driving 8%+ system-wide sales and operating income growth. We believe the company can outperform these targets, as expenses will grow slower than sales while it laps its investments at Burger King in the U.S. The company also updated investors on franchisee profitability with significant improvements at each of its brands, including nearly 50% increases in franchise profitability at Burger King in the U.S. and 30% at Tim Hortons in Canada…” (Click here to read the full text)
Overall, Restaurant Brands International Inc. (NYSE:QSR) ranks 3rd on Insider Monkey’s list of Billionaire Bill Ackman’s 2024 Portfolio: 6 Best Stocks to Buy in 2024. You can visit Billionaire Bill Ackman’s 2024 Portfolio: 6 Best Stocks to Buy in 2024 to see other stocks in the list. While we acknowledge the potential of Restaurant Brands International Inc. (NYSE:QSR), our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than Restaurant Brands International Inc. (NYSE:QSR) but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.