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Is Howard Hughes Corporation (HHC) A Smart Long-Term Buy?

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·5 min read
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Pershing Square Holdings Ltd, an investment management firm, published its fourth-quarter 2020 investor letter – a copy of which can be downloaded here. A net return of 70.2% was recorded by the fund for the year-end of 2020, outperforming its S&P 500 benchmark that delivered an 18.4% return in the same period. You can view the fund’s top 5 holdings to have a peek at their top bets for 2021.

Pershing Square Holdings, in their Q4 2020 investor letter, mentioned The Howard Hughes Corporation (NYSE: HHC) and shared their insights on the company. The Howard Hughes Corporation is a Dallas, Texas-based real estate company that currently has a $5.4 billion market capitalization. Since the beginning of the year, HHC delivered a 23.31% return, impressively extending its 12-month gains to 112.70%. As of April 01, 2021, the stock closed at $97.33 per share.

Here is what Pershing Square Holdings has to say about The Howard Hughes Corporation in their Q4 2020 investor letter:

"In 2019, HHC’s Board of Directors announced a strategic transformation plan to streamline the company’s organizational structure, sell $2 billion of non-core assets, and accelerate growth in its core master planned community (“MPC”) business. In 2020, David O’Reilly, formerly HHC’s CFO and President, became the company’s new CEO, and Jay Cross, formerly President of Hudson Yards, became the new President. This transformation into a leaner and more focused organization allowed the company to successfully navigate the impact of COVID-19.

When the pandemic began, it was clear that it would have a draconian effect on the company’s assets. Management acted quickly and decisively to stabilize the business by raising $600 million of equity in March 2020 to strengthen the company’s balance sheet. The Pershing Square funds invested $500 million in that offering. Additionally, HHC’s transition to a decentralized operating model significantly reduced overhead expenses and enabled each MPC to more nimbly react to challenging local market conditions.

Since the second quarter of 2020, the company has experienced a robust recovery across all of its assets, which we expect will continue into 2021. Despite the impact of the pandemic, new home sales across HHC’s MPCs grew an impressive 10% in 2020. Demand for residential land in HHC’s MPCs continues to accelerate, benefiting from out-of-state migration from higher cost-of-living and higher tax states. New homebuyers are drawn to HHC’s walkable communities, expansive open spaces, and amenity-rich urban cores in Summerlin, Bridgeland and the Woodlands Hills, the three MPCs which own the substantial majority of HHC’s remaining unsold land.

Within HHC’s portfolio of income-producing commercial properties, office and multi-family assets have remained highly resilient. The company has collected 97% of office and 98% of multi-family rents from the beginning of Q2 2020 to year-end. Retail and hospitality fundamentals are steadily improving with phased re-openings and a gradual rebound in foot traffic. Highlighting management’s conviction in the recovery, in February 2021, the company announced the acceleration of plans for approximately two million square feet of commercial development across the company’s MPCs.

In Ward Village, the company experienced strong condo sales activity with the help of an innovative digital sales platform which provides homebuyers with a completely online experience, including virtual 3D condo tours and live chat capabilities. The company’s latest luxury condo project, Victoria Place, is already 77% pre-sold after launching sales in December 2019. At the Seaport, which has begun to reopen after being impacted by New York City’s stay-at-home orders, the company has found creative ways to activate the property with innovative new offerings like “The Greens,” a rooftop dining venue.

We believe that the impact of the COVID-19 pandemic is largely transitory, and expect Howard Hughes’s uniquely well positioned MPCs and portfolio of high-quality operating assets to deliver substantial growth for years to come."

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Our calculations show that The Howard Hughes Corporation (NYSE: HHC) does not belong in our list of the 30 Most Popular Stocks Among Hedge Funds. As of the end of the fourth quarter of 2020, The Howard Hughes Corporation was in 27 hedge fund portfolios, compared to 31 funds in the third quarter. HHC delivered a 23.31% return in the past 3 months.

The top 10 stocks among hedge funds returned 231.2% between 2015 and 2020, and outperformed the S&P 500 Index ETFs by more than 126 percentage points. We know it sounds unbelievable. You have been dismissing our articles about top hedge fund stocks mostly because you were fed biased information by other media outlets about hedge funds’ poor performance. You could have doubled the size of your nest egg by investing in the top hedge fund stocks instead of dumb S&P 500 ETFs. Here you can watch our video about the top 5 hedge fund stocks right now. All of these stocks had positive returns in 2020.

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best innovative stocks to buy to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website:

Disclosure: None. This article is originally published at Insider Monkey.