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Bill Ackman of Pershing Square Capital revealed a new stake in Starbucks on Tuesday at a conference in New York.
The hedge fund has 15.2 million shares or about $900 million worth at current prices. Starbucks shares popped after the news came out. They closed up 2 percent, to $57.71.
Ackman's average cost for Starbucks was $51 a share, according to his presentation made at the Grant's Interest Rate Observer conference, which means the hedge fund manager is already up about 13 percent on the investment.
"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," the presentation said. It's a "rare opportunity to own one of the world's best businesses at a discount."
Ackman also calls China the company's single largest growth opportunity and notes that Starbucks' current two-year share repurchase plan represents 20 percent of the company's market value.
The activist investor said in August that the fund had taken a new undisclosed position that made up about 10 percent of the portfolio and that apparently was Starbucks. The fund also disclosed new stakes in United Technologies and Lowe's Cos. back then.
Pershing has been trying to turn itself around after several years of lackluster performance and some high-profile blowups. Since its peak of $20 billion in 2015, the fund has lost more than half of its assets as investors fled abysmal returns amid a bull market.
The fund has scored big this year on Chipotle, where it is the second-largest shareholder. Shares of the fast-food burrito chain are up 55 percent. It also made a quick $100 million in profit from a stake in Nike it sold earlier this year.
Meanwhile Starbucks has been struggling with weak sales in the U.S. for several quarters. Its hope was that offering more cold beverages and new lunch items would draw people into its cafes. However, the coffee giant has also had to scale back its store growth and close a number of underperforming company-owned cafes in densely populated areas. Starbucks usually closes about 50 stores annually, but expects to shutter about 150 next year. The company also plans to reduce the number of new licensed stores in 2019 by about 100.
In a statement, Starbucks said: "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."
The stock is little changed in 2018.
Through September, Pershing Square had $8.3 billion of assets under management and its net performance was up 15.8 percent.
— CNBC's Sarah Whitten contributed to this report.