Billionaire Bill Ackman Has Close to 20% of His Portfolio in 1 Magnificent Travel Stock

Core Viewpoint - Bill Ackman, a prominent investor, has significantly invested in Hilton Hotels, which has seen a nearly 200% increase in stock price since 2018, now constituting 18.5% of his portfolio [1] Group 1: Company Overview - Hilton Hotels is a nearly 100-year-old brand that has transitioned to a capital-light business model by licensing its brand to property owners rather than owning all hotels outright [2] - This licensing model allows property owners to benefit from higher occupancy rates and the ability to raise room prices, creating a mutually beneficial relationship [2] Group 2: Growth Strategy - Hilton is expanding its hotel room inventory through acquisitions and organic development, recently adding 18,000 net rooms globally [3] - The company anticipates a revenue per room growth of 2% to 3% for the year, contributing to its annual sales of $10.8 billion and operating income of $2.34 billion [3] Group 3: Capital Returns - Hilton has a strong cash flow due to its capital-light model, allowing for significant shareholder returns primarily through share repurchases, having reduced its share count by 25% over the last decade [4] - This strategy enhances returns for existing shareholders, including notable investors like Bill Ackman [4] Group 4: Valuation and Investment Considerations - Hilton's management projects earnings per share (EPS) of just over $6 for 2024, leading to a forward price-to-earnings (P/E) ratio of 38.8, significantly higher than the S&P 500 average of 29 [5] - The stock has appreciated by 60% in the past year, with its P/E ratio rising from around 20 at the beginning of 2023, indicating a potentially overvalued situation for new investors [5]