Bill Ackman of Pershing Square Capital revealed on Tuesday at a conference in New York that he has a new stake in Starbucks.
The hedge fund has 15.2 million shares or approximately $900 million worth at the current prices. Starbucks shares popped after the news came out and closed up 2 percent, to $57.71.
Ackman’s average cost for Starbucks was $51 per share, according to the presentation he made at the Grant’s Interest Rate Observer conference. This means the hedge fund manager is up about 13 percent on the investment already.
The presentation said that if SSS (same store sales) and valuation revert even closer to the historical average levels, they believe that over the next three years SBUX shares can more than double itself. It added that this is a very rare opportunity to get ownership of one of world’s best businesses at a discount.
Ackman also called China as the company’s single largest growth opportunity and noted that Starbucks’ current two-year share repurchase plan represents around 20 percent of the company’s market value.
The activist investor had said in August that the fund had taken an undisclosed position that made up to 10 percent of the portfolio and that was Starbucks apparently. The fund also disclosed new stakes in Lowe’s Cos. and United Technologies back then.
In the food and beverage space, Pershing holds shares of Chipotle Mexican Grill and Restaurant Brands International, which is the parent of Burger King and Mondelez.
Pershing has been trying hard to turn itself around after many years of lackluster performance and some high-profile blowups. The fund has lost more than 50% of its assets as investors fled abysmal returns amid a bull market, since its peak of $20 billion in 2015.
Starbucks, in the meanwhile has been struggling with weak sales in the U.S. for several quarters now. The company had hopes that offering more cold beverages and new lunch items would draw people into its cafes. However, the coffee giant had to scale back its store growth and close a number of underperforming company-owned cafes in some of the densely populated areas. The company usually closes about 50 stores annually, but it expects to shutter about 150 next year. The company also has plans to reduce the number of new licensed stores in the year 2019 by about 100.
Pershing Square had $8.3 billion of assets under management and its net performance was up 15.8 percent, through the month of September.