Billionaire Bill Ackman's hedge fund Pershing Square bought up 5.84 million shares of sports retailer Nike (NKE) for about $365 million in the fourth quarter of 2017, according to a 13F report released last week.
A recent report by Insider Monkey details how Pershing Square has experienced a change of fortunes in the past several years. Pershing Square owned $16 billion in equities by the end of 2014, when it returned more than 40%. In the following three years, however, Ackman's fund finished the year well behind the S&P 500 Index.
Some analysts have blamed Pershing's investments in Valeant Pharmaceuticals (VRX) and Chipotle Mexican Grill (CMG) for the fund's underperformance. But Pershing Square is making an effort to center itself on its core investment principles, according to Ackman's latest 13F report. And that renewed focus includes a hefty investment in Nike.
Pershing Square Bought $365 Million in Nike
Ackman initiated a sizable investment in Nike stock in the final quarter of the year, buying up 5.84 million shares for about $365 million. (See more: Inside Billionaire Bill Ackman's $365 Million Nike Investment: 13F.)
This was the sum total of the investment by the end of the quarter, although Ackman may have purchased smaller stakes in the company consecutively across the quarter.
Nike maintained global dominance at the end of 2017. The sports apparel and equipment outfit posted $8.6 billion in sales in a recent quarter, and it topped its expected earnings per share of $0.40, delivering $0.46 per share instead.
And Nike has been particularly strong internationally. The North American portion of the company is facing stiff competition from other sports apparel companies. In fact, Nike's North American revenue fall as a result of declines in footwear sales.
Why Did Ackman Buy Nike Now?
Analysts may wonder why Ackman would opt to buy into Nike at this point in time, when the stock has been hovering around its all-time high levels. Ackman likely sees the company as having significant growth potential. Nonetheless, should that come to pass, the current highs may be overshadowed by later performance.
There are many reasons why an investor like Ackman may see Nike's potential for further growth. The company maintains incredibly strong branding, and it has the potential for substantial margin growth as a result of new manufacturing processes. Nike has also established itself as a marketing leader.
Ackman also added significantly to two other holdings in the fourth quarter. He bought 9.33 million shares of Mondelez International (MDLZ), and he ended 2017 with 26.5 million shares of Restaurant Brands International (QSR). It's unclear whether or not Pershing Square's holdings in these and other companies have changed since December 31, 2017. Although it was released just last week, the 13F report reflects the fund's holdings at that time. (See more: Bill Ackman's Success Story: Net Worth, Education & Top Quotes.)