Pershing Square Capital: 6 investment lessons from Bill Ackman (2024)

You look at some of the best investors’ portfolios and will find both winning and losing investments. This will also tell you about their winning investing lessons too that made them admirable and enviable in the investment community.

To start with, who is Bill Ackman? For the unversed, he is William Albert Ackman – a well-known American billionaire investor whose current net worth stands at $3.5 billion. He is also the CEO and Portfolio Manager of Pershing Square Capital which is known to have some huge risky bets while making both long and short investments in the public markets.

Ackman’s key investing lessons are impervious to daily market movements. His thoughts oriented to study the market and put his bets accordingly can be gleaned from his astute and tactical approach towards investments, some of which are:

A long-term approach

Ackman does not believe in buying stocks in a huff. “Buy today, sell tomorrow" is not his investing style. A cursory look at his portfolio suggests how this financial genius harbours a long-term investing approach while investing. Just look at the stocks he has invested in over the years and continues to hold them underscores his “value investing" approach towards investments.

Ackman’s investment approach involves recognizing undervalued companies that possess strong fundamentals and maintaining a long-term investment strategy, enabling the assets to gain value gradually.

Detailed research

This successful portfolio manager surely does not believe in buying stocks based on hearsay. A thorough assessment of investments is important to evaluate if they are worth considering and for how long. His reputation stems from his thorough and meticulous research and analysis process prior to making investment choices. He places great importance on comprehending a company's business model, competitive advantages, financial situation, and management team as crucial factors before investing any capital.

Quality matters

You cannot win with degrading stocks just by buying them at throwaway prices. The stocks must add value to your portfolio, which means that you must know why you are investing in them. Evaluate the quality of a stock or investment, estimate its growth potential, and evaluate how it would help your portfolio grow both in value and size.

Ackman actively seeks out companies that possess enduring competitive advantages. He specifically targets businesses that demonstrate solid growth prospects, sustainable profitability, and resilient cash flow. He firmly believes that investing in such high-quality companies significantly enhances the likelihood of achieving long-term success.

Invest heavily

Your earnings do not depend only on where you invested and how long you had stayed invested. A lot depends on how much money you had invested, thus, hinting at the need to assume concentrated positions in a portfolio. Ackman allocates a substantial portion of his capital to a select few companies that undergo careful evaluation and selection. By adopting this strategy, he can exert a more substantial influence on the performance of his investments.

Focus on active investing

There is more to active investing than relying on passive investments to make money. To know where you must invest to make money, you may talk directly to the company’s management to learn their business strategy, thus, lending you an idea of their business potential.

Apart, actively engaging with management allows the benefit of advocating for changes and sometimes also hobnobbing with the company’s Board of Directors to give new directions to the company or participate in its governance. The primary objective of this strategy is to unlock shareholder value and instigate positive transformations within the companies he invests in.

Have conviction in your decisions

Ackman places significant emphasis on the virtues of patience and unwavering conviction in one's investment thesis. He firmly believes in maintaining steadfastness even during times of market volatility or temporary setbacks, as long as the long-term fundamentals of the investment remain solid and intact.

A lot can be learned from how and where Ackman invests. Some cynics may argue that his company focuses more on businesses that generate huge cash flows while labelling his investing strategy defensive.

If you are interested in the world’s financial markets or still learning how to make money out of them, Ackman’s investing lessons will help you delve into his sharp mind that arranges, collates, and configures stocks according to their inherent and market values before deciding whether they are worth the investment.

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Published: 14 Jun 2023, 08:55 AM IST