3 Investing Lessons from Billionaire Bill Ackman’s Ownership of Chipotle Stock
Retail investors won’t necessarily be able to replicate Ackman’s success in Chipotle, but they can learn from it. Chipotle Mexican Grill (CMG -1.31%) has long been a primary holding of Pershing Square Capital Management, the fund managed by billionaire Bill Ackman. His fund first bought the stock during the second half of 2016, and it has earned considerable returns since that time.
In total, Pershing Square has purchased 2.9 million shares worth approximately $1.1 billion. However, close to 2.2 million shares were sold in subsequent quarters, bringing in estimated gross proceeds of $1.9 billion. This leaves the fund with around 744,000 Chipotle shares worth more than $2.3 billion.
In addition to those massive returns, such successes can yield valuable investment lessons. Here are three that may help investors follow Ackman’s lead and earn comparable returns with their own investments.
**1. Be visionary**
A visionary viewpoint does not necessarily mean one sees the future at a specific level or foresees unusual occurrences. Still, it requires a perspective of seeing where a company like Chipotle could go based on its past and that of comparable enterprises.
This was a comparatively easy task with Chipotle. When Ackman’s fund first bought its stock in 2016, Chipotle had a 10-year track record as a public company and had expanded to about 2,000 restaurants. That was enough time to tell whether the restaurant stock would become an underperformer like El Pollo Loco or a global success more comparable to McDonald’s.
**2. Invest in what you know**
Additionally, Ackman is quite familiar with the restaurant industry, making it an excellent place for him to look for stocks. Of the seven stocks in the Pershing Square portfolio now, two are restaurant operators. Chipotle, the largest holding, makes up 20% of its investments. Restaurant Brands International makes up another 17% of the portfolio.
**3. Let your winners run**
The other lesson is one that Ackman may or may not have followed — hang onto your winning stocks. As mentioned before, Pershing Square once owned around 2.9 million shares of Chipotle. However, beginning in the third quarter of 2018, he began to steadily sell shares. Other than a modest purchase in Q3 2021, he has been gradually unloading a majority of his stake to arrive at the approximate 744,000 shares the fund holds today.
Ultimately, winners tend to keep winning, and knowing an industry well can help one tell a long-term winner from a flash in the pan. Such knowledge probably influenced Ackman to hold on to some Chipotle shares and continue benefiting from its success.
Ackman’s history with Chipotle stock shows he has not only made an excellent stock pick but also revealed lessons other investors can apply to their stock purchases. Such principles may not turn a shareholder into a billionaire. Nonetheless, they can make one a seasoned, successful investor who can better capitalize on opportunities as they arise.