Shares of Domino’s Pizza (NYSE:DPZ) are in the spotlight after Bill Ackman’s Pershing Square reported selling its entire 2.09 million share stake. The billionaire investor first purchased DPZ stock during Q2 of 2021, amassing a nearly 6% stake. At the time, Ackman stated that he was impressed with the pizza chain’s technology and delivery infrastructure.
Now, about a year and a half later, Ackman is exiting his position. The sale is somewhat unusual for the long-term investor, as Pershing carries an average holding period of 19.43 quarters, or 4.8 years, for stocks in its 13F portfolio.
Ackman believes that Domino’s business has shown impressive growth, such as “three-year stacked growth for the second quarter of 17% in the U.S.” The growth came from pricing changes, improved staffing and labor utilization, and the company’s Boost Week promotions. However, these improvements caused the valuation of DPZ to grow to “28 times our estimate of next twelve months’ earnings.”
DPZ Stock: Bill Ackman Sells His Entire Position
As a result, Ackman believes that DPZ is relatively overvalued in light of a volatile investing environment. The cash generated from the sale will be used for other undisclosed alternative investment opportunities. He concluded, “We have enormous respect for Domino’s and its management team led by Russell Weiner, and we expect the company to continue its long track record of success.”
After the sale, Pershing now owns a total of six positions in its 13F portfolio. Ackman is still heavily invested in the restaurant industry, holding 1.1 million shares of Chipotle (NYSE:CMG) and 23.82 million shares of Restaurant Brands International (NYSE:QSR). As of Q2, Pershing managed a 13F portfolio worth $7.46 billion.
Pershing has returned a loss of 10.8% year-to-date, compared with a decline of 8.8% in the S&P 500. However, since its inception in 2004, the fund has returned a cumulative return of 1,517.7%. That equates to a compound annual return of 16.1%. Meanwhile, the S&P 500 has cumulatively returned 460.6% since 2004, equivalent to a compound annual return of 9.7%.
Meanwhile, Ackman recently disclosed his successor. In the event of an unforeseen circumstance, CIO Ryan Israel will takeover as Pershing’s CEO. Ackman cited Israel’s investing acumen, leadership skills and candor.
On the date of publication, Eddie Pan did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
