William Ackman said on Tuesday his hedge fund Pershing Square Capital Management has taken a roughly US$900-million position in Starbucks Corp. as he sees a chance for the world’s biggest coffee chain to reignite growth even as it struggles with stagnant sales in its home market.
Mr. Ackman revealed the position at Grant’s Fall 2018 Conference and said he had been building the stake in the Seattle-based company over the past 90 days. His fund now owns 15 million shares, said people who heard him speak.
Starbucks shares rose as much as 5.5 per cent on the news and closed up 1.2 per cent at US$57.71 on Tuesday.
Mr. Ackman, one of the world’s most closely watched activist investors, said there is room for growth at Starbucks – especially in China, which he called the company’s “single-largest unit growth opportunity.” He titled his presentation Doppio – meaning a double shot of espresso – as he said the share price could double over the next three years.
There has been mounting speculation that an activist might be ready to take a position in Starbucks, which has stores in more than 70 countries. The company was not immediately available for comment.
Mr. Ackman said Starbucks shares have been weakened by softer U.S. sales amid heavy competition and the June 4 departure of executive chairman Howard Schultz.
In his presentation, Mr. Ackman expressed confidence in management, saying chief executive Kevin Johnson’s recent moves are “encouraging.”
A spokesman for Mr. Ackman did not immediately return a call for comment.
Mr. Ackman had been hinting at the investment for months, telling analysts in August that an unnamed investment represented about 10 per cent of Pershing Square’s portfolio.
For Pershing Square, which invested US$8.4-billion at the end of September, this marks the fourth time Mr. Ackman has unveiled a new position this year. Early in the year, he said he was invested in Nike Inc. followed by news that the firm had made bets on United Technologies Corp. and Lowe’s Cos. Inc.
Mr. Ackman has made his name betting on companies including Canadian Pacific Railway Ltd. and ranks as one of the most closely watched investors on Wall Street despite several years of losses after bad bets on Herbalife Nutrition Ltd. and Valeant Pharmaceuticals. He has restaurant experience, having invested in McDonald’s Corp. years ago and in Chipotle Mexican Grill Inc. more recently.
The firm’s private hedge fund has gained 13.8 per cent in the first nine months of the year and its publicly traded fund is up 15.8 per cent, marking a dramatic turnaround after three years of back-to-back losses.