Bill Ackman's 7-Stock Portfolio Is Quietly Beating the Market. Here's What's Inside It.

Surprisingly enough, most hedge funds habitually underperform the broad market. That's what makes any of them that reliably beat the S&P 500 of such interest.

And that's what makes Bill Ackman's hedge fund Pershing Square Capital Management (NYSE: PS) so interesting right now. Although it lagged early this year, it has outperformed -- albeit unevenly -- the broad market since its launch in 2004. Moreover, its flagship fund Pershing Square Holdings' (OTC: PSHZF) positions are leading the marketwide bullish charge again right now.

Even more incredible is that rather than diversifying this portfolio, a mere seven stocks account for 98% of the fund's total value. Here's a rundown of those seven.

Ackman's seven

Just because Ackman likes them doesn't necessarily mean they're all right for your portfolio. He and Pershing's investors are accustomed to inconsistent performance. You may not be able to afford such uncertainty and prolonged dry spells from your portfolio.

Still, there's nothing wrong with poaching an idea or two from his picks if they make sense for you. Here are the seven.

Data sources: Hedge Follow, Value Insider.

Microsoft is arguably the proverbial pick-of-the-litter right now, since it may well have hit bottom after a sizable sell-off from last August's peak. As Ackman himself recently explained in a post on X in May, this pullback dragged MSFT shares down to a "compelling valuation" that didn't reflect the true value of Microsoft's cloud business or its office-productivity software. Notably, Ackman sold a solidly performing Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL) to make room for the software giant.

Microsoft stock recently soared too, reaching multi-month highs in response to recently released fiscal fourth-quarter numbers that are showing more promise than shareholders were anticipating.

Ackman had this to say about shares of Facebook parent Meta (now its second-youngest position, purchased in Q1): "We believe concerns around META's AI-related spending initiatives are underestimating the company's long-term upside potential from AI."

Bill Ackman. Image source: Getty Images.

Some of Pershing's struggling, older holdings are finally perking up as well. Its stake in e-commerce outfit Amazon raced to a record high late last month in response to solid Q2 cloud computing results, for instance.

Something to consider even if the decision is "no"

Not every name in the portfolio is doing nearly as well as these are. Then again, not every name needs to. Two or three great trades can handle most of the heavy lifting that most investors need from their portfolio.

That being said, it's not as if these recent winners are guaranteed to dish out any bullish follow-through either.

Whatever the case, the fact that Bill Ackman chose all of these names -- and is deciding to stick with them -- speaks volumes. You just need to decide for yourself if you can digest the same risk and volatility that he and Pershing's shareholders can.

James Brumley has positions in Alphabet. The Motley Fool has positions in and recommends Alphabet, Amazon, Brookfield Corporation, Howard Hughes, Meta Platforms, Microsoft, and Uber Technologies. The Motley Fool recommends Restaurant Brands International. The Motley Fool has a disclosure policy.