Last Friday, the omicron strain of COVID-19 was officially dubbed a “variant of concern” — and the markets sure got concerned.
In fact, with the Dow Jones Industrial Average shedding 905 points, Friday was the worst day this year for the benchmark index. But not everyone is turning bearish.
“Early reported data suggests that the omicron virus causes ‘mild to moderate’ symptoms (less severity) and is more transmissible,” tweeted Bill Ackman, founder of hedge fund Pershing Square, on Sunday. “If this turns out to be true, this is bullish not bearish for markets.”
He later clarified that it would be bullish for the equity market and bearish for the bond market — and since Ackman’s hedge fund has an equity portfolio valued at over $9 billion, let’s take a look at some of those holdings.
One could turn out to be a profitable pickup, especially if you’re investing for free.
Restaurant Brands International (QSR)
Restaurant Brands International came into existence in 2014 through the merger of Burger King and Canadian coffee chain Tim Hortons. Then in 2017, the company added Popeyes Louisiana Kitchen to its portfolio.
Like most restaurant stocks, Restaurant Brands shares tumbled during the pandemic-induced market sell-off in early 2020. But the stock has made a strong recovery, backed by substantial improvements in the company’s business.
According to the latest earnings report, comparable sales — a key measure of a restaurant chain’s health — increased 8.9% at Tim Hortons, 7.9% at Burger King, but slipped 2.4% at Popeyes Louisiana Kitchen.
Adjusted earnings came in at $0.76 per share for the quarter, compared to $0.68 per share it earned in the year-ago period.
Restaurant Brands is offering a healthy annual dividend yield of 3.7%. For comparison, that’s a higher yield than fast-food giants McDonald’s (2.2%), Starbucks (1.8%) and Yum! Brands (1.6%).
But if you’re finding it hard to pick individual winners in this uncertain environment, remember some investing apps will build you a passive income portfolio automatically just by using leftover change from your everyday purchases.
Lowe’s Companies (LOW)
Lowe’s is Bill Ackman’s largest holding by market value, and the position has served the billionaire investor quite well. Shares of the home improvement retail giant are up 55% year-to-date, while the S&P 500 has returned just 26%.
What’s more impressive than Lowe’s short-term stock price performance is how the company’s dividend has grown over decades. In fact, Lowe’s has increased its payout to shareholders every year for the past 59 years.
Those decades of hikes have brought Lowe’s quarterly dividend to 80 cents per share, translating to an annual yield of 1.3%. That said, Lowe’s competitors are also strong dividend-paying companies: Home Depot yields 1.6%, Target pays 1.4%, while Walmart offers an annual yield of 1.5%.
Due to Lowe’s rally over the past year, its shares now trade at over $240 apiece. That’s a bit steep for some, but you can get a smaller chunk of the company using a popular app that allows you to buy fractions of shares with no fees.
Hilton Worldwide Holdings (HLT)
Considering the dual threat of Airbnb and the COVID-19 pandemic, hotel giant Hilton may not seem like an obvious choice for many investors.
But those that kept Hilton stock in their portfolio — such as Ackman’s hedge fund — are being handsomely rewarded for their faith.
Year-to-date, shares have climbed nearly 30% and are actually trading higher than where they were before the pandemic.
“We believe that Hilton will continue to grow its market share over time given independent hotels’ increased interest in seeking an affiliation with global brands, particularly in the wake of the pandemic,” Pershing Square said in its investor letter in August.
“While the recovery may continue to be uneven, Hilton has made tremendous progress which will help it become an even more profitable and stronger business going forward.”
In the third quarter, Hilton’s system-wide comparable revenue per available room (a key statistic often shortened to RevPAR) increased 98.7% year-over-year, driven by higher occupancy and average daily rate.
An artful alternative
Of course, it’s no sure thing that the omicron variant will turn out mild and that the stock market will start surging once again.
If you want to invest in something that has little correlation with the ups and downs of the stock market, consider this real but overlooked asset: fine art.
Wall Street mogul Steve Cohen’s investment in this asset class is valued at over $1 billion. It’s also found in the portfolios of Kevin O’Leary, Jeff Bezos and Bill Gates.
Why? Contemporary artwork has outperformed the S&P 500 by a commanding 174% over the past 25 years, according to the Citi Global Art Market chart.
It’s true that investing in art by the likes of Banksy and Andy Warhol used to be an option only for the ultra-rich. But with a new investing platform, you can invest in iconic artworks, too.
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.