In my Why I Added Howard Hughes Holdings (HHH) To The FFJ Portfolio post, I disclose the purchase of 500 HHH shares @ $68.074 on June 3, 2025 in one of the 'Core' accounts in the FFJ Portfolio. Upon further reflection, I acquired another 500 shares on June 5 @ $67.7237. My total HHH exposure is currently 1000 shares.
HHH's Business Overview in its FY2024 Form 10-K reflects:
The Company’s award-winning assets include one of the nation's largest portfolios of master planned communities (MPCs), spanning approximately 101,000 gross acres, as well as operating properties, strategic developments, and other assets across five states. We create some of the most sought-after communities in the country by curating an environment tailored to meet the needs of our residents and tenants. Our unique business model allows us to seek attractive risk-adjusted returns while maintaining a sharp focus on sustainability to ensure our communities are equipped with the resources to last several decades.
We operate through three business segments: Operating Assets, MPCs, and Strategic Developments. We create a continuous value-creation cycle through operational and financial synergies associated with these three business segments. In our MPC segment, we plan, develop, and manage small cities and large-scale, mixed-use communities, in markets with strong long-term growth fundamentals. This business focuses on the horizontal development of residential land. The improved acreage is then sold to homebuilders who build and sell homes to new residents. New homeowners create demand for commercial developments, such as retail, office, multifamily, and hospitality offerings. We build these commercial properties through our Strategic Developments business at the appropriate times, which helps mitigate development risk, using the cash flow harvested from the sale of land to homebuilders. Once the commercial developments are completed, the assets transition to our Operating Assets segment, which increases recurring Net Operating Income (NOI), further funding our Strategic Developments. New office, retail, and other commercial amenities make our MPC residential land more appealing to buyers and increase the velocity of land sales at premiums that typically exceed the broader market. This increased demand for residential land generates more cash flow from MPCs, thus continuing the value-creation cycle.
Our assets are located across the United States, with the vast majority of the assets in our Operating Assets segment located within our MPCs. This helps us achieve scale and, in most cases, critical mass, which leads to pricing power in lease and vendor negotiations; increased ability to attract, hire, and retain the best local leadership and leasing teams; flexibility to meet changing customer demands; and enhanced ability to identify and capitalize on emerging opportunities. Our MPCs, including Floreo, our unconsolidated joint venture, span approximately 101,000 gross acres, with approximately 21,000 residential acres of land remaining to be developed and sold in high-demand geographic areas. In addition to the residential land, our MPC segment contains approximately 14,000 acres designated for commercial development or sale to non-competing users such as hospitals. This land is held in our MPC segment until we identify demand for a new commercial development, at which point the land is transitioned into our Strategic Developments segment.
HHH, however, is undergoing a transformation into a diversified holding company. The plan is to emulate Berkshire Hathaway (BRK).
In my prior post I provide a link to an interview with Bill Ackman in which he explains his vision for HHH. I once again provide a link to this interview.
In this Bloomberg podcast, Bill Ackman explains why and how HHH is to morph into a 'new' HHH.
Final Thoughts
In my January 8, 2025 The Position Sizing Conundrum post, I note that the extent of a portfolio's diversification is subject to debate.
Some investors prefer to hold a VERY concentrated portfolio.
Charlie Munger, Warren Buffett's former business partner, suggests an investor should hold no more than 10 holdings.
Mohnish Pabrai, another well known successful investor, also holds a very concentrated portfolio (typically under 6 holdings).
Holding a very concentrated portfolio requires an investor to have the utmost conviction their investment selections WILL perform well.
Other investors 'throw mud at the wall'. I recollect one blogger disclosing a total portfolio value under ~$300,000 with exposure to 130+ positions . This, in my opinion, is the epitome of someone who really does not know what they are doing. Putting things in perspective, imagine owning 10 shares of a particular company where the share price increases by $500. This is only $5000!
Relative to the overall value of our total investment portfolio, a 500 HHH share exposure is insignificant. Even if the share price rises by $200, the increase in the value of this holding is immaterial.
The increase remains immaterial even at 1000 share exposure. I do not have the intestinal fortitude, however, to immediately make HHH a top 20 holding. I want to see material progress in the company's transformation before adding to my exposure.
My current average HHH purchase price is ~$67.90. I anticipate the investment community will start to take notice of HHH's transformation if it acquires an insurance company and some high quality small- or mid-cap companies within the next 12 -18 months. If this happens, a share price approaching Pershing Square's ~$90/share purchase price is not out of the realm of possibility.
If you decide to invest in HHH, I caution you that the risk is higher than the companies I typically cover. I always encourage investors to remain a long-term shareholder but the vary nature of HHH's 'new' business model requires an investor to have at least a decade investment time horizon.
I wish you much success on your journey to financial freedom!
Note: Please send any feedback, corrections, or questions to [email protected].
Disclosure: I am long HHH.
Disclaimer: I do not know your circumstances and do not provide individualized advice or recommendations. I encourage you to make investment decisions by conducting your research and due diligence. Consult your financial advisor about your specific situation.
I wrote this article myself and it expresses my own opinions. I do not receive compensation for it and have no business relationship with any company mentioned in this article.
