Howard Hughes Holdings: A Discounted Gem in Ackman's Berkshire 2.0 Play?

The stock price of Howard Hughes Holdings (HHH) currently sits at $70.52, a marked discount to the $100 per share investment by Pershing Square Capital's Bill Ackman, who recently increased his stake to $900 million. This gap has sparked debate among investors: Is HHH undervalued, or are its risks—high leverage, execution uncertainty—justified by the price? The answer lies in dissecting recent insider activity, financial metrics, and the strategic vision underpinning the company's transformation.

The Insider Signal: Confidence in a Discount

The most compelling evidence of confidence comes from Jose Miguel Bustamante, President of Nevada operations, who purchased 49,000 shares at $70.00 per share on May 19, 2025—a price below HHH's current valuation. This “informative buy” (funded personally, signaling optimism) contrasts with routine equity grants to directors, such as the 624 million shares awarded to Pershing Square in May 2025. While the latter reflects strategic stake-building, Bustamante's transaction underscores operational conviction.

The broader insider trend paints a mixed picture: $49,000 in informative buys over the past quarter are dwarfed by institutional grants. Yet, Ackman's $900 million commitment—a 10% stake—carries outsized influence. As the architect of Pershing Square's “Berkshire Hathaway 2.0” vision, his bet on HHH's pivot to a diversified holding company suggests he sees long-term value beyond real estate cycles.

Q1 2025: Resilience Amid Missed Estimates

Despite falling short of revenue expectations ($199.33M vs. $211.24M forecast), HHH's Q1 results revealed structural strength. Key highlights:
- Master Planned Communities (MPC): Revenue surged 121% YoY to $71.64M, driven by high-margin land sales in Las Vegas and Texas. Two “SuperPass” land sales in Summerlin netted over $1.5M per acre, showcasing pricing power.
- Operating Assets: Net Operating Income (NOI) rose 9% YoY to $72M, with office and multifamily portfolios offsetting retail softness.
- Condo Pipeline: A $2.7 billion backlog (64–97% presold across projects like Le Nou and Park Ward Village) provides near-term cash visibility.

While the stock dipped briefly on the earnings miss, it rebounded 2.4% after hours, reflecting investor focus on the company's strategic shift. Management's guidance—$375M in MPC EBT and $257–267M in operating NOI for 2025—aligns with this optimism.

Valuation: A Bargain by Most Metrics

At a P/E of 11.05 and P/B of 1.28, HHH trades at a steep discount to the S&P 500 Real Estate Sector's Q1 2025 average P/E of 45.63, even after recent declines. This undervaluation is puzzling given:
- EV/EBITDA of 11.06, below peers and supportive of a $10–15 per share upside over two years.
- $800 million in liquidity, including $494M in cash, to fund debt refinancing and growth.

The Risks: Leverage, Execution, and Market Cycles

The discount isn't without reason. Key risks include:
1. High Leverage: $350M in 2025 maturities require refinancing, though management has already extended the Marlowe loan.
2. Execution of the Holding Company Model: Diversifying into non-real estate sectors—a core part of Ackman's vision—depends on acquiring “durable growth companies,” a high-risk, high-reward strategy.
3. Real Estate Market Softness: A slowdown in land sales or condo demand could strain margins, particularly in cyclical markets like Las Vegas.

The Investment Case: A Long-Term Play for the Bold

For investors with a multi-year horizon, HHH offers asymmetric upside. The $70.52 price sits well below Ackman's $100 cost basis, and the $1.28 P/B suggests tangible asset value is underappreciated. While risks are material, the $2.7B condo pipeline and MPC land sales provide a cushion, while Pershing Square's stake ensures governance accountability.

Final Analysis

Howard Hughes Holdings is a company at a crossroads. Its real estate core remains strong, but its future hinges on Ackman's vision to build a Berkshire-style conglomerate. The current valuation—discounted relative to both peers and Pershing Square's investment—makes it a compelling long-term bet for investors willing to endure volatility. For the cautious, wait for clearer execution signals; for the bold, this could be the next chapter in Ackman's legacy.

Investment advice: HHH's risk-reward profile favors patient investors. Monitor refinancing progress and condo presale conversions closely before scaling positions.