Study of Ackman
- 03/04/2024 – Tilson recommended Ackman’s interview
I’m looking forward to listening to my college buddy Bill Ackman’s three-and-a-half-hour marathon interview on Lex Fridman’s podcast. You can watch it on YouTube here, listen to it here, and here’s an outline:
(00:00) – Introduction
(08:55) – Investing basics
(13:47) – Investing in music
(22:08) – Process of researching companies
(26:47) – Investing in restaurants
(32:16) – Investing in Google
(37:58) – AI
(43:13) – Warren [Buffett]
(45:22) – Psychology of investing
(54:53) – Activist investing
(1:04:41) – General Growth Properties
(1:20:57) – Canadian Pacific Railway
(1:28:21) – OpenAI
(1:32:32) – Biggest loss and lowest point
(1:47:21) – Herbalife and Carl Icahn
(2:04:11) – Oct. 7
(2:10:42) – College campus protests
(2:29:09) – DEI in universities
(2:50:00) – Neri Oxman
(3:15:30) – X and free speech
(3:19:54) – Trump
(3:27:30) – Dean Phillips
(3:34:36) – Future
Puck’s William Cohan wrote an in-depth column about the interview: The Measure of Ackman.
This is the most interesting revelation from the interview, a battle with another hedge-fund titan, which Bill had never discussed publicly:
Ackman also disclosed, for the first time he said, a battle he had around 2017 with another billionaire hedge fund manager, Paul Singer at Elliott Management, who was trying to force Bill out of business by striking him while he was down.
What happened, Ackman explained, was that Elliott took a “big position” in Pershing Square Holdings – the U.K.-based, publicly trading investment company that is Bill’s version of Berkshire Hathaway. He said Elliott then shorted all the stocks in Bill’s portfolio and went long on the stock he had shorted, “making a bet that we’d be forced to liquidate.”
Bill said that Elliott then came to him and tried to “force” him to liquidate. It was a nightmare scenario. “I envisioned an end where the divorce takes all my resources,” he said, “the permanent capital vehicle ends up getting liquidated, and another activist in my industry puts me out of business.” And then he met Oxman “and I had fallen completely in love with her.”
As the article continues, the “nightmare” went on:
[Ackman said] “I was envisioning a world where I was bankrupt, a judge found me guilty of whatever and he sends me off to jail… I find myself in this incredible mess. And I decided I didn’t want things to end that way.”
He then did something he pledged to himself that he would never do: borrow money. He went to JPMorgan Chase and, on “a handshake” with the bank, borrowed $300 million. (“I had been a good client over a long period of time,” he said.)
He used the money to buy up enough blocks of stock in Pershing Square Holdings to thwart Elliott’s strategy…
“I remember the day I bought a big block of stock in the market and I get a call from Gordon Singer, who’s Paul Singer son who runs the London part of their business. He’s like, ‘Bill, was that you buying that block?’ I said, ‘Yes.’ He said, ‘F–k.’ He knew that once I got that, they were not going to be able to succeed and they went away. And that was the bottom. And we’ve had an incredible run since then.”
- 06/26/2021 – good to learn from Ackman’s 7 mistakes and 7 principles
Bill Ackman: 7 Mistakes Every Investor Makes
- Seven mistakes every investor makes
- Overcoming adversity
- learning from mistakes, learn everything possible from Buffett
- be confident
- contribute more
- deal with criticism
- always do your due diligence
Here are Bill Ackman’s principles to successful investing:
- Simple and predictable businesses.
- Free cash flow generative.
- Dominant market position.
- Large barriers to entry.
- High return on capital.
- Limited exposure to non-controllable extrinsic risks.
- Strong balance sheet where outside capital is not necessary
- 06/05/2021 – Ackman’s interview on WSJ
Bill Ackman Predicts Financial Crisis. This is his Stock Portfolio NOW
- the inflation is everywhere. It might not be transitory as Fed thinks/hopes
- wage can not be reduced once it is increased
- economy reopening, people’s animal spirits + stimulus plan + infrastructure plan + Fed’s extremely accommodated rate policy, everything happens in a few quarters
- Fed made a mistake, a preemptive rate raise is way better than the force raise
- he thinks Fed will raise interest rate – for sure
- it is a great risk for economy to be overheating
- you want to own businesses which have pricing power and their businesses will not change dramatically when rate goes up
- if rate rises, growth stocks will crash
- The fund, with net assets of nearly $10 billion, has a concentrated equity investment portfolio that includes Lowe’s (LOW), Hilton Worldwide Holdings (HLT), Chipotle Mexican Grill (CMG), Agilent Technologies Inc (US:A), Restaurant Brands International (QSR), Howard Hughes (HHC), and Domino’s (DPZ).
- 11/19/2020 – Ackman’s interview – never mind to be a good trader occasionally; read everything from Buffett; long year 2021; An industrial company today can probably go public with a technology multiple” – on the booming demand for warehouses from e-commerce companies.
Here are Ackman’s 19 best quotes, condensed and lightly edited for clarity:
- 1. “I had seen the Matt Damon ‘Contagion’ film so perhaps that was framing the mind” – on his early concerns about COVID-19.
- 2. “My theory was the only way to shut this thing down ultimately would be a global economic shutdown, and the markets were not trading as if there was going to be a global economic shutdown” – on his decision to hedge Pershing’s stock portfolio.
- 3. “I felt what it was like to be a trader for the first time in my life. I’m not really a trader, but it was cool and I insisted on trading it alongside my traders just because it was fun” – on the experience of reversing his fund’s hedge after it paid off, using a laptop on a makeshift desk in a beach house.
- 4. “If you want to learn about the investment business just read everything Warren Buffett’s written, watch every interview he’s ever given.”
- 5. “The untold story of Berkshire is that it owns a lot of companies that, frankly, have opportunities for improvement and margin enhancement. I think Buffett’s one of the great allocators of capital, but also part of his whole ‘schtick’ is not getting involved in the management of any of the businesses that he’s acquired.”
- 6. “We felt that the next generation of leadership is gonna do less of the big Warren Buffett-type acquisitions and more of actually optimizing the portfolio” – detailing one of his reasons for investing in Berkshire, along with its attractive valuation and the promise of bigger stock buybacks.
- 7. “We’ve handed our capital to Warren to invest, but he’s handicapped a bit because he’s lugging around hundreds of billions of dollars” – on the thinking that led Pershing to sell its Berkshire stake. Ackman and his team were surprised Buffett didn’t deploy Berkshire’s cash more aggressively when the pandemic caused markets to tank in the spring.
- 8. “We have probably lost more money in Berkshire Hathaway than anyone in the world.”
- 9. “It’s a way for us to buy a super high-quality private company and add it to our stable” – on the purpose of Pershing Square Tontine, Ackman’s special-purpose acquisition vehicle or SPAC that raised $4 billion when it went public in July.
- 10. “The state of corporate governance, how directors think about their roles as fiduciaries has come very, very far over 17 years as a direct result of shareholder activism.”
- 11. “It’s like running for office. It’s the same dirty tricks and cheating, and claimed cheating on how the votes are being counted, and false advertising” – on the reality of being an activist shareholder.
- 12. “China was a tea-drinking country until Starbucks showed up.”
- 13. “Trump’s actually done a lot of good, he’s done some harm as well and he’s done it in a way that I think is far from ideal” – praising the president’s corporate-tax reforms and efforts to bring manufacturing back to the US.
- 14. “Ivanka’s probably gonna run in four years and I think how he handles this will affect her ability to get elected” – on the risk that President Trump’s refusal to concede the presidential election will hurt his daughter’s chances to become president in the future.
- 15. “It’s probably the single greatest time in history to open a restaurant” – Ackman pointed to pent-up demand fueled by lockdowns, low rents, and less competition due to restaurant closures during the pandemic.
- 16. “2021 could be a very, very good year in markets. Go long” – the investor highlighted low interest rates, potentially more stimulus, possible infrastructure spending, well-capitalized banks, and easy access to capital.
- 17. “I think unsophisticated people will take this announcement as, ‘Oh I don’t have to worry,’ and you want people to be a bit scared” – on the risk that Pfizer’s positive vaccine news makes people complacent and less diligent about taking precautions against catching and spreading the virus.
- 18. “An industrial company today can probably go public with a technology multiple” – on the booming demand for warehouses from e-commerce companies, and the fact that even Amazon, which controls many aspects of its business, still has to pay rent.
- 19. “If I ever think about it, just tell me the number I need to call to make sure I don’t do it again” – on the subject of whether he would return to short-selling.
- 09/01/2020 – Ackman’s turnaround in 2019
Bill Ackman‘s investment turn around lesson in 2019: he attributed his performance to reading Buffett’s early letters to investors. I should also read Buffett’s letters everyday.
Pershing Square Capital, Ackman’s publicly traded hedge fund, ended the year up 58.1%, , massively outperforming the S&P 500’s near 30% return and the average hedge fund’s near 10% return.
So how did Ackman pull off this turnaround?
In 2019, he attributed his performance to reading Warren Buffett (Trades, Portfolio)’s early letters to investors, particularly regarding his thoughts about a long-term capital structure.
Referencing Buffett’s decision to shutter his investment partnerships in 1969, Ackman told the 13-D Active-Passive Investor Summit, “I think what Mr. Buffett realized in 1969 is that being a longterm investor with short-dated capital is just ultimately going to lead to a bad outcome at some point in time.”
This is why Ackman has been concentrating his efforts on his publicly traded vehicle rather than the private hedge fund, which is susceptible to short-termism.
The value manager also told his audience in 2019 that he’s refocused his operations on finding simple, predictable and cash flow-positive companies rather than complex, high-risk, high-reward opportunities like Valeant.
We can learn a lot from Ackman’s turnaround. He’s admitted his mistakes, reinvented his portfolio and moved on. That requires a lot of humility and emotional strength. He might have attracted criticism for investments in the past, but we can’t attack his decision to take a step back and re-evaluate his process.
Bill Ackman: Getting Back Up [The Knowledge Project Ep. #82] [ the detailed interview on Bill Ackman
Ackman explained in details in his investor letter about his hedge (Pershing Square Capital Management, L.P. Releases Letter to Investors)
