Following the Federal Reserve’s 11 interest rate hikes, many experts have expressed concerns about the impact of higher rates on the American economy.
According to Bill Ackman, CEO of Pershing Square Capital Management, the economy is starting to slow.
“I think the level of real interest rates is high enough to slow things down, you know, high mortgage rates, high car rates, high credit card rates, they’re starting to really have an impact on the economy,” he said in a recent CNBC interview. “The economy is still solid, but it’s definitely weakening.”
The billionaire investor believes that on a long-term basis, structural inflation would be persistently higher.
Elevated interest rates don’t affect everyone equally. Ackman noted that “a big percentage of the country” holds fixed-rate mortgages at 4% or below. He also highlighted that many businesses have fixed-rate debt that’s “extended for a relatively long period of time.”
For others, though, the situation can be far more challenging.
“There are people who borrowed short term at a low fixed rate and are getting repriced and you look at a lot of commercial real estate investors, they’re going to have a very challenging period. I think that’s really the big threat,” he said.
Some investors are also apprehensive about the impact of higher rates on the stock market. Ackman’s firm, however, still has an equity portfolio worth billions. Here’s a look at its top three holdings.
Chipotle Mexican Grill Inc. (NYSE:CMG)
According to Pershing Square Capital Management’s latest Form 13F filing with the Securities and Exchange Commission, it owned 953,608 shares of Chipotle as of June 30. With the position valued at $2.04 billion at the time, Chipotle was the largest publicly traded holding in Ackman’s portfolio.
As a restaurant chain specializing in tacos and Mission-style burritos, Chipotle has more than 3,250 restaurants in the U.S., Canada, the U.K., France and Germany.
In the second quarter, the company’s revenue grew 13.6% year over year to $2.5 billion.
The stock has also received increasing investor attention. Year to date, Chipotle shares have surged 34%.
Restaurant Brands International Inc. (NYSE:QSR)
Pershing Square’s second-largest publicly traded holding also is in the fast-food business: Restaurant Brands International.
The company is the parent to several major quick-service brands, including Burger King, Tim Hortons and Popeyes Louisiana Kitchen.
In the second quarter, systemwide sales at Restaurant Brands International increased 14% year over year.
The company also pays quarterly dividends and offers an annual yield of 3.5%.
But the stock’s performance in 2023 hasn’t fared as well as Chipotle’s: QSR shares are down just over 1% year to date.
Lowe’s Companies Inc. (NYSE:LOW)
Ackman’s fund held 7,468,850 shares of Lowe’s at the end of June. With the position valued at $1.69 billion at the time, Lowe’s was the third-largest public holding in Pershing Square’s portfolio.
As the second-largest home improvement retailer in the world, Lowe’s operates over 1,700 stores and employs approximately 300,000 associates. In the U.S., the company handles around 17 million customer transactions each week.
In the fiscal quarter ended Aug. 4, Lowe’s comparable sales declined 1.6%. For the full fiscal year, management expects comparable sales to be down 2% to 4%.
The company is returning cash to investors. In the second quarter, Lowe’s spent $2.2 billion repurchasing approximately 10.1 million shares while also paying $624 million in dividends.
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This article Economy Is ‘Definitely Weakening’: Bill Ackman Warns Of A ‘Big Threat’ For Certain Americans. Here Are His Top 3 Holdings originally appeared on Benzinga.com
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