By Jody Chudley, Financial Analyst
Today I’m going to show you how to get 27% off a basket of blue chip stocks.
There is no catch here.
You pay only 73 cents on the dollar. Everyone else pays the full buck.
It’s a deal that sounds too good to be true… I know.
But it isn’t.
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This Opportunity is a No-Brainer Bargain
The basket of blue chip companies that I’m referring to consists of exactly ten stocks.
These are the companies that are currently owned by Pershing Square Holdings (PSHZF), a publicly traded investment company.
Pershing Square Holdings has no operations. It just owns stocks.
If you own Pershing Square Holdings, you own the stocks that it owns — nothing more, nothing less.
Today, you can buy Pershing Square Holdings in the stock market for around $16.34 per share Meanwhile, the value of the ten stocks that Pershing Square owns equates to $22.40 per share.
You can see that net asset value right here.
That means today, you can buy $22.40 worth of publicly traded stocks for $16.34 per share. That is 27% off the price that this basket of stocks is trading for in the stock market right now.
It’s as simple as that.
The ten stocks that Pershing Square owns are fine companies, too. The financial highlights are captured below.
- Pershing’s ten stocks are more profitable than the average S&P 500 company (22% EBIT1 margins vs. 15% for the S&P 500)
- Pershing’s ten stocks are growing faster than the average S&P 500 company (14% EBIT growth per year vs. 8% EBIT growth for the S&P 500)
- Pershing’s ten stocks are growing on a per share basis even faster (18% earnings per share growth per year vs. 8% earnings per share growth for the S&P 500)
So not only are you buying a basket of stocks at a 27% discount, you are also buying a basket of stocks that is comprised of very strong companies.
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Tell Me The Names of the Stocks in this Basket Already!
These ten companies — which combined have fatter profit margins and are growing faster than the S&P 500 — are depicted below. You probably know most of these world class companies.
As a group, these ten stocks perfectly align with Pershing Square’s investment philosophy — to invest in conservatively financed, non-cyclical, and economically-resilient businesses that tend to outperform in volatile market environments.
This has generated a cumulative return of 606.6% for PSHZF shareholders since 2004 vs. just 236.5% for the S&P 500.
This is a portfolio of stocks that I would be happy to own at their current trading prices. But at a 27% discount to the market’s current trading prices, I believe this is a rare opportunity that combines the potential for significant reward with very little downside risk.
And If You Aren’t Convinced Yet…
There are also three cherries on top of this opportunity that make it even better:
Cherry on Top #1: Pershing Square Holdings has instituted a quarterly dividend of $0.10 per share, which means that the stock yields almost 2.5%. I believe this dividend is not only enjoyable by itself, but it will also start to attract income investors to the stock which will do good things for its trading price.
Cherry on Top #2: The Pershing Square investment team owns a significant percentage of Pershing Square Holdings shares, and are therefore fully aligned with shareholders. Never underestimate the power of having incentives aligned.
Cherry on Top #3: Pershing Square Holdings has been using excess cash to repurchase shares at this big discount to net asset value. Last year, $300 million of shares were repurchased at a discount which is very accretive on a per share basis for remaining shareholders.
You can look long and hard for stock market bargains. Here is one that is hiding in plain sight just waiting to become a part of your portfolio.