Activist Investor Bill Ackman Just Made a Big Bet on Starbucks

Bill Ackman has revealed that his fund Pershing Square has bought 15.2 millions of Starbuks shares, a value of about $900 million.

Ackman’s Pershing Square also has shares of Chipotle Mexican Grill (it is the second largest shareholder), Restaurant Brands International, and Mondelez.

The famed investor made his reveal in New York on Tuesday at the Grant’s Interest Rate Observer conference. His average price on Starbucks is $51 a share. Shares closed at $57.71 on Tuesday.

“If SSS (same store sales) and valuation revert closer to historical average levels, we believe that SBUX shares can more than double over the next three years,” Ackman’s presentation said. It’s a “rare opportunity to own one of the world’s best businesses at a discount.”

It was in August that Ackman said his fund had taken a position that was about 10% of its portfolio but did not disclose the company. Now we know it was Starbucks.

Starbucks stated, “We view the active, engaged dialogue that we have with shareholders as critical input into our strategic approach and we value constructive feedback on delivering long-term shareholder value. We look forward to maintaining a productive dialogue with Mr. Ackman as we do with all of our shareholders.”

CNBC’s Jim Cramer said Tuesday however that those who buy Starbucks now may be disappointed. He said on “Power Lunch,” that “If you come in at this level, you may end up being a little disappointed.”

“If you come in now expecting that Ackman is going to demand certain things – well, I’m sure Ackman’s a happy camper,” Cramer added. “A lot of things have been right but there is no need to chase if this quarter is not going to be brilliant. And I don’t think this quarter is going to be brilliant.”

Disclaimer: We have no position in Starbucks Corporation (NASDAQ: SBUX) and have not been compensated for this article.