Bill Ackman: We Are ‘Firing On All Cylinders’

Bill Ackman: We Are ‘Firing On All Cylinders’
  • Bill Ackman's hedge fund Pershing Square recorded an impressive 58% return in 2019.
  • The fund exited its stake in Starbucks after gaining 73%.
  • Ackman discussed how Agilent Technologies trades at an intrinsic discount.

Activist investor Bill Ackman’s streak of losses may have come to an end. The billionaire CEO and founder of hedge fund Pershing Square Capital Management said in a Wednesday presentation his hedge fund is now “firing on all cylinders,” according to Bloomberg.

2019 Performance

Pershing Square’s 2019 performance marks the hedge fund’s best yearly return since its creation in 2014, according to Bloomberg. Ackman’s hedge fund reported a 58% gain last year with contributions coming from notable big winners, including Chipotle Mexican Grill, Hilton Worldwide, Fannie Mae, Freddie Mac, and others. The hedge fund ended the year with around $8.6 billion in assets under management.

If 2019 was the year of the turnaround, Ackman made some wise investments, including buying 4 million shares of Berkshire Hathaway. He confirmed his stake in Warren Buffet’s fund last August represented 11% of Pershing’s net asset value and has since then appreciated more than 15%.

The fund, however, lost 1.3% of its value in the first month of 2020.

Past Mistakes

According to Markets Insider, Pershing entered 2019 on a multi-year losing streak. The fund posted a loss in 2015, 2016, 2017 and would have ended 2018 in the green if not for fees. 

Some of Ackman’s more notable and public losses over the years include pharmaceutical company Valeant and a short bet on Herbalife which was the subject of a documentary aired on Netflix. 

Ackman acknowledged investing in Valeant was a “very big mistake” and it appears he made sure not to repeat past blunders given record 2019 returns.

Caffeine Fix

Ackman’s presentation to investors on Wednesday confirmed his hedge fund pocketed a 73% return in coffee giant, Starbucks. He argued in the presentation that Starbucks is likely to continue generating “robust earnings growth” given its dominant, attractive, and profitable brand. But now is a good time for the hedge fund to exit its position because future returns could “become more modest.”

Agilent’s Discount Valuation

Ackman continued his presentation and discussed his stake in Agilent Technologies, born out of a spin-off from Hewlett-Packard. He said he accumulated a position at an average cost per share of $76.58 and the stake represented around 8% to 9.5% of the hedge fund’s entire portfolio back in November.

He didn’t offer any indication of how large the position stands today, according to Bloomberg. But Ackman did say Agilent’s current valuation “represents a discount to intrinsic value” and underestimates the company’s “high-quality business model.”

He added Agilent boasts an attractive mix of recurring revenue, long-term growth, and an opportunity to significantly expand margins moving forward.

By Jayson Derrick
Jayson Derrick has been writing professionally about stocks since 2011. He is particularly interested in alternative investments, hedge funds, and activist investing. He is a big fan of NHL hockey and lives in Montreal, Canada with his wife and four year old daughter.
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