Pershing Square Holdings, Ltd., an investment management firm, has released its second quarter 2021 letter to investors – a copy of which can be downloaded here. For the first half of 2021 and from the start of the year until August 17, 2021, the net asset value per share of the Company, including dividends, increased by 7.3% and 5.8%, respectively, and the price of the Company’s stock rose 4.7% and 2.0%, respectively, compared to the S&P 500 which returned 15.2% and 19.5% over the same period. You can check out the top 5 holdings of the fund to get an idea of ââtheir top bets for 2021.
In Pershing Square Holdings’ Q2 2021 letter to investors, the fund mentioned Hilton Worldwide Holdings Inc. (NYSE: HLT) and discussed its position on the company. Hilton Worldwide Holdings Inc. is a McLean, Virginia-based hotel company with a market capitalization of $ 37.7 billion. HLT has achieved a return of 21.89% year-to-date, while its 12-month returns are up 58.94%. The stock closed at $ 136.55 per share on September 28, 2021.
Here’s what Pershing Square Holdings has to say about Hilton Worldwide Holdings Inc. in its Q2 2021 letter to investors:
“While the hospitality industry has been extremely negatively impacted by the COVID-19 pandemic, Hilton has done a great job of navigating the volatility of the industry, which is a testament to the high quality business model, light assets and high margins of the company and its superb management team. From the onset of the pandemic, Hilton’s management team took decisive action to ensure the company not only handled what it knew to be a difficult time, but also positioned the company to generate improved margins, cash flow and returns on investment once business recovers. at pre-COVID-19 demand levels.
Industry RevPAR (the industry measure for comparable store sales at a given hotel) hit a low in April 2020 and showed sequential improvement each quarter as travel and mobility recovered with the deployment of the COVID-19 vaccine and a resumption of travel. In recent months, there has been growing evidence that a robust recovery scenario is underway, led by domestic pleasure travel currently trending above demand levels of 2019. For the first three weeks July, the most recent data provided by the company, RevPAR has already recovered to 85% of 2019 levels – a significant improvement over previous months thanks to an increase in hotel occupancy and a rapid recovery of the rate.
While management anticipates a moderation in leisure demand as the summer exits, it expects the moderation in leisure travel to be offset by a more pronounced recovery in transitional business travel as the offices will reopen this fall. While there remains near-term uncertainty in domestic travel given the increase in the number of COVID-19 cases following the arrival of the Delta variant in the United States, we believe the medium-term outlook continue to point to a robust recovery scenario. Throughout the pandemic, Hilton has taken steps to reduce the company’s spending by approximately 20% from 2019 levels. Simultaneously, the company has provided resources and support to the community of Hilton owners. , which further strengthened Hilton as a preferred franchise partner, thereby expanding Hilton’s pipeline of units around the world.
During the last quarter, Hilton affirmed its short- and medium-term outlook for single-digit mid-net unit growth and a recovery from its historic 6-7% net unit growth from 2023-2024, higher than that of its competitors, and further proof of Hilton’s unique business model.
We believe that Hilton will continue to grow its market share over time given the increased interest of independent hotels in seeking affiliation with global brands, particularly in the aftermath of the pandemic. While the recovery may continue to be patchy, Hilton has made tremendous strides that will help it become an even more profitable and stronger business going forward. “
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Based on our calculations, Hilton Worldwide Holdings Inc. (NYSE: HLT) was unable to secure a spot on our list of the 30 most popular stocks among hedge funds. HLT was in 45 hedge fund portfolios at the end of the first half of 2021, compared to 47 funds in the previous quarter. Hilton Worldwide Holdings Inc. (NYSE: HLT) has generated a return of 12.17% in the past 3 months.
The reputation of hedge funds as savvy investors has been tarnished over the past decade, as their hedged returns could not keep up with the unhedged returns of stock indices. Our research has shown that small cap hedge fund stock selection managed to beat the market by double digits every year between 1999 and 2016, but the margin for outperformance has shrunk in recent years. Nonetheless, we were still able to identify in advance a select group of hedge funds that have outperformed S&P 500 ETFs by 115 percentage points since March 2017 (see details here). We were also able to identify in advance a select group of hedge funds that underperformed the market by 10 percentage points per year between 2006 and 2017. Interestingly, the margin of underperformance of these stocks has increased in recent years. Investors who are long in the market and short on these stocks would have reported more than 27% per year between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
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