About Bill Ackman
William (‘Bill’) Ackman is the founder and CEO of Pershing Square Capital Management and a widely feared activist investor. Ackman, through Pershing Square and a prior hedge fund, has earned a net worth of more than $2 billion.
Ackman was well-poised for a career in business and investing. His father ran a commercial real estate mortgage brokerage, and Ackman attended Harvard for his undergraduate degree and his MBA. In 1992, shortly after earning his MBA, Ackman set up his first hedge fund, called Gotham Partners, with fellow investor David Berkowitz.
Gotham Partners closed in 2002, and Ackman established Pershing Square in 2004. Under Ackman’s watch, Pershing Square has grown to more than $11 billion in assets under management. At age 54, Ackman continues to run Pershing Square. The fund delivered a whopping 58% return in 2019.
Bill Ackman’s Investing Style
Bill Ackman has built his career by making long-term investments in a few companies. His positions are extremely well-researched and, given Ackman’s history as an activist investor and visionary trader, well-publicized. At any given time, Pershing Square typically has less than 10 open positions.
Most of Ackman’s trades are long positions. He looks for companies that he believes are performing below their potential, either as a result of poor leadership or underperforming business segments, and then purchases shares at a steep discount to what he sees as the potential value. Ackman will often purchase a large fraction of a company’s outstanding shares, giving him a significant amount of voting power or even a seat on the company’s board. This allows him to pressure the company into making big changes, such as replacing the CEO or other executives or changing business directions. Ackman then sells his stake in the company after changes have been made, and the company’s stock price has risen.
Ackman has also had some short positions. These are less common for Pershing Square, but they are made based on in-depth research into companies’ business models. Ackman’s short bets have been highly publicized, which has led to criticism that he is actively undermining companies that he has shorted.
Bill Ackman’s Key Investing Tips And Insights
Bill Ackman has shared some insights into investing through presentations and interviews over the years. Many of his top tips reflect the way that he chooses what companies to invest in – through careful, meticulous research.
Above all else, Ackman emphasizes that it is important for investors to understand what they are buying. He recommends understanding how a company makes money and looking for companies that have strong moats, are resilient against external factors, and that have limited debt and no controlling shareholders.
Ackman also recommends that investors chart their own path rather than follow the stocks that are getting the most attention. Searching for stocks that are trading at a value is key to making significant returns over time, and companies that are getting a lot of attention are typically overvalued.
Bill Ackman’s Key Holdings
Ackman has made a number of noteworthy trades during the 16 years he has run Pershing Square. One of the fund’s early investments was in Wendy’s International in 2005. Ackman pressured the company to spin off the Tim Horton’s brand through an IPO, earning Pershing Square a massive windfall in the process.
Pershing Square also made billions in profit by shorting the bond insurance company MBIA. Ackman argued that the company’s AAA rating was inaccurate, and he placed a price target of $0 on the company. Ackman’s short position was opened in 2003 and finally paid off in 2009, when MBIA’s stock price fell dramatically as a result of the financial crisis.
Ackman also profited from the market chaos caused by the coronavirus pandemic. He spotted the risk of the pandemic after lockdowns began in China and hedged against a drop in Pershing Square’s ongoing positions. Ackman then built up positions in Lowe’s, Starbucks, Blackstone Group, Howard Hughes, and Restaurant Brands in March and April as the stock market bottomed out.
Most recently, Pershing Square has established a $1 billion ‘blank check’ company that would allow Ackman to buy out a burgeoning company and prepare it for an IPO. The company used a similar vehicle to take Burger King public in 2012. It is not yet clear what company Ackman intends to bet on.
Bill Ackman’s Controversies
Ackman’s aggressive investing style has come with criticism. While shorting MBIA, Ackman was accused of actively attempting to undermine the company’s stock price by publicly making the case for why it’s AAA credit rating was unsupported. Shortly after Ackman forced Wendy’s to spin off the Tim Horton’s brand and then closed his position, Wendy’s share price collapsed. Many investors pointed to the spin-off of one of Wendy’s most profitable and fast-growing brands as the underlying cause.
Broadly speaking, public companies have learned to become wary of attention from Ackman. Positions by Pershing Square are often feared because they come with significant demands for change in how a company is doing business or in its executive team. Ackman has exited several positions, including one in JCPenny, after strong disagreements with company board members.
Ackman also has a long-running feud with another well-known activist investor, Carl Icahn. The fight stems from an investment Icahn made in Hallwood Realty in 2003 through an agreement with Ackman. When Icahn made a $9 million profit from the trade, he refused to pay Ackman according to their earlier agreement. Ultimately, the argument ended up in court, and Icahn was forced to pay Ackman 50% of profits from the Hallwood Realty trade.
Ackman and Icahn’s feud intensified in 2013, when the two took opposing positions in Herbalife. Ackman directed a $1 billion short against the company through Pershing Square, arguing that Herbalife’s multilevel marketing business model was, in fact, an illegal pyramid scheme. Icahn then invested several hundred million in Herbalife, effectively betting against Ackman. In early 2018, after Herbalife’s share price had nearly doubled, Ackman exited his bet, and Icahn announced a profit of nearly $1 billion.
Bill Ackman’s Services
Ackman does not offer any public services for retail traders, as he remains at the helm of Pershing Square. However, since 2015, a portion of Pershing Square has been publicly traded. After the fund’s blow-out returns in 2019 and its highly successful position around the coronavirus pandemic, Pershing Square shares have nearly doubled in value from 2018.
Bill Ackman has made billions in profits by establishing large, multi-year positions in a handful of companies. His investments, typically made through Pershing Square Capital Management, are highly researched and often closely followed by retail traders and institutional investors alike. Ackman has been on a particular roll in the past year and a half, earning 58% returns in 2019 and 35% returns for Pershing Square in the first half of 2020.