Investment Strategies Applied by Bill Ackman
Bill Ackman, a successful investor and hedge fund manager, was born on May 11, 1966 in America. He spent his childhood in Chappaqua, New York. He received a Bachelor of Arts degree magna cum laude in history from Harvard College in 1988. Then, in 1992 he received his MBA degree from Harvard Business School. He is the founder as well as the CEO of Pershing Square Capital Management, a hedge fund management company. Bill Ackman is considered a contrarian investor but he considers himself an activist investor.
He was a brilliant student. His faculties from Harvard Business School knew it and they had faith on him. One of his faculty Marty Peretz provided him half a million dollar as seed money when he launched his first hedge fund. After the completion of his MBA in 1992, Bill Ackman with his former classmate David Berkowitz started the Gotham Partners hedge fund. Though Gotham failed a decade later when their investment in a golf course operator gone bad, but Bill Ackman didn’t gave up. He returned in the very next year and started Pershing with $54 million and made it $1.2 billion. Some people calls it a turning point for his career. After that he has donated half of this profit for charity work. It made him to be in the lime light of the media.
Investment strategies by Bill Ackman
Bill Ackman has faced both the success and the failure. But, comparing to his success, those failures are very little. He had some strategies that he used to follow and that brought him success. Here are some strategies of Bill Ackman:
- Bill Ackman doesn’t manage the actual companies. He mainly manages investments. He likes to maintain a highly concentrated portfolio with at most 15 names and sometimes 10. This concentration, along with the need to invest $10 billion or more, means that he takes larger stakes in increasingly bigger companies. When he picks companies, he likes to target the real estate industry. It is a trend coming from his family history. His activist companies include dozens of real estate managers, REITs, and real estate finance companies. Other segments, like retailing (JC Penney, Target) or restaurants (McDonalds, Wendy’s), usually entail restructuring company real estate. Though he is trying to go beyond the real estate industry now a days. Because he wants to invest in bigger amount.
- One of his biggest wins came as Gotham Partners was closing and that time he was also researching mortgage insurer MBIA (MBI). Ackman challenged MBIA’s triple-A rating, alleging that the company was guaranteeing untested asset-backed securities. His allegations drew the attention of New York’s attorney general, who investigated Ackman for six months but eventually dropped the investigation. Ackman began shorting MBIA in 2004 at around $60 and rode the stock all the way down to $8 before closing out his short.
- Another one of Ackman’s biggest wins, and a stock he still owns, is General Growth Properties (GGP). Ackman snatched up GGP shares for $0.35 back in 2008 when the mall operator was struggling to stay out of bankruptcy. Since then, the stock has made Ackman nearly 100 times his investment.
Conversely, some of Ackman’s biggest blunders have been in the retail space. This includes his latest half a billion-dollar loss on struggling retailer J.C. Penney (JCP). Ackman sold his entire 18% stake in JCP after a public letter to the board calling for a new chairman caused immense backlash, and it became apparent that the retailer’s issues might be more deeply rooted than in management alone.
Bill Ackman is still in the market, making money by using his unique strategies. We are hoping that a few more secret strategies of Bill Ackman will reveal and the investors will able to learn much more about hedging fund.
Author: Mahfujur Rahman
Mahfujur Rahman is one of the top contributors of GotAbout Business Strategy and Analysis. He has finished his BBA from North South University and currently doing his Masters of Business Administration in Dhaka University. He has a strong interest in Finance and Investment.