Bill Ackman just decaffeinated his portfolio.
The billionaire investor on Wednesday said his Pershing Square hedge fund sold its stake in Starbucks for a massive 73-percent profit.
The timing of the sale suggests a piping hot return of $516 million, although a source close to Pershing said the returns are nearer to $500 million after fees.
In the presentation released to Pershing investors on Wednesday, Ackman only said Pershing exited its Starbucks stake amid concerns that “prospective returns” had become “more modest.” Starbucks’ stock, down 0.6 percent on Wednesday to $87.83 a share, has flatlined this year following a jolt of 36 percent last year.
The timing of the stock sale — at the end of January — also suggests Ackman may have been spooked by potential headwinds Starbucks is facing in China.
On Jan. 29, the coffee seller said it would be closing 2,000 locations in China to protect staff against the coronavirus outbreak. Starbucks also faces stiffening competition from Luckin Coffee, a 2017 startup that is now China’s fastest growing coffee chain. Andrew Left of Citron Research told Reuters on Tuesday that he sees Luckin’s stock doubling once the coronavirus scare finally lifts.
“It was a great time to sell,” said one hedge fund manager that trades Starbucks. “China is a disaster and it’s not getting better soon. But this might be as much about Luckin in the long-term,” this person said, referring to China’s fastest growing coffee chain startup.
Pershing on Wednesday also touted new positions in biotech firm Agilent and Warren Buffett’s Berkshire Hathaway, both of which Ackman described as stocks he aims to hold on to for years. Pershing also continues to own fast-food chain Chipotle Mexican Grill, which has more than doubled in value since the firm bought it in 2016 at $405 a share.
Chipotle opened Wednesday at $892 a share.
It’s a good start to the year for Ackman, who saw his assets halved between 2015 and 2018 on botched bets like pharma giant Valeant and nutrition company Herbalife.
Last year, Pershing boasted a 58 percent return — beating out peers and the S&P 500 index, which surged by 28 percent.