Shares of Howard Hughes Corp (NYSE:HHC) stock are in full focus following several buys by Pershing Square and Bill Ackman. Howard Hughes operates as a real estate development and management company with operations in six U.S. states and a historical return on equity (ROE) of 24%.
During Q3, the company reported a huge boost in profitability. Net income tallied in at $108.1 million compared to $4.1 million a year ago. That’s equivalent to a diluted earnings per share (EPS) of $2.18, up from seven cents year-over-year. Howard also repurchased 368,806 shares at an average price of $68.98 per share.
On the other hand, the company carries a total debt of $4.6 billion and a cash balance of $354.6 million. 82% of the debt will mature in 2026 or later.
With that in mind, let’s get into the details of Ackman’s purchases.
HHC Stock: Bill Ackman Continues to Buy Shares
Ackman’s most recent purchase occurred on Dec. 29. On that day, he reported purchasing 1,019 shares at an average price of $74.68 per share. In fact, the fund manager has purchased HHC stock on nine separate occasions since Nov. 29.
It should be noted that all of his purchases made on Dec. 6 and later were enacted with a prearranged 10b5-1 plan. A Schedule 13D filing dated Dec. 5 notes that Pershing Square has entered into a 10b5-1 plan to purchase up to 39% of all HHC outstanding stock, effective Dec. 6. There were 49 million shares of HHC common stock outstanding as of Oct. 26, which means that Ackman may purchase up to 19.46 million shares. As of Dec. 29, he owned a total of 15.89 million shares.
In Pershing Square’s 2022 semiannual shareholder letter, Ackman explained:
“We believe HHC is extremely well positioned for the current inflationary environment due to its combination of high quality real estate assets and a largely fixed-rate liability structure. We expect the company to benefit from substantial land price appreciation and rental income growth in the coming years.”
As stated earlier, debt seems to be a lingering issue for the company. However, Ackman points out that about 83% of the debt is “fixed or swapped to a fixed rate,” which will insulate it from rising interest rates. He also added that HHC was influenced to execute buybacks in 2022 due to a discounted valuation.
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.