Bill Ackman gave a short introduction on why he is bullish on the US, and then did a Q and A on the first day of the Value Investing Congress.
Bill Ackman is the Managing Member and Portfolio Manager of Pershing Square Capital Management, L.P., a concentrated research-intensive fundamental value investor in long and occasionally short investments in the public markets. Pershing Square has played an active role in creating value at companies including McDonald’s, Ceridian Corporation, Longs Drugs, Wendy’s International, and General Growth Properties.
Prior to forming Pershing Square, Mr. Ackman co-founded Gotham Partners, L.P., a public and private equity investment partnership. Prior to Gotham Partners, Mr. Ackman began his career in real estate investment banking at Ackman Brothers & Singer, Inc. Mr. Ackman received an MBA from the Harvard Business School and a Bachelor of Arts magna cum laude from Harvard College.
Mr. Ackman’s board memberships include the Board of Dean’s Advisors of the Harvard Business School and a number of not-for-profit boards including the Pershing Square Foundation, a charitable foundation that he founded in 2007.
There is a new book out about Ackman titledConfidence Game
, which details Ackman’s short of MBIA, while simultaneously fighting off regulators who were attempting to “kill the messenger (Ackman)”.
Ackman says world is an uncertain place so do not try as an investor to look like an economist. However, Ackman has a view on the macro situation himself which is more bullish than the rest of the speakers.
Ackman is bullish for the following reasons:
Corporate America has become much more lean and efficient. Because of the credit crisis the large companies are extremely well capitalized as they have been hoarding cash.
Cost of debt capital is extremely low, and the securitization market is coming back. Private equity deals are also coming back.
Stock prices are still relatively cheap.
From a corporate point of view it is an attractive environment.
From a consumer point of view many people who were the most levered have deleveraged.
The only thing that is missing is consumer and business confidence.
Houses are the most affordable they have been in many years.
Weak dollar is helping exports.
One big negative is that state, and local governments are in significantly bad shape. There will be overhang for a while.
Ackman spoke about his recent purchase of JC Penny.
JC Penny is very sensitive to economy but price is cheap.
Their real estate portfolio is better than that of competitors.
JCP has significant non-operating assets, which Ackman discovered while researching General Growth Properties.
Their balance sheet is very strong, and they are close to having no net debt within a short time frame. The company has $2 billion in cash.
The General Growth bankruptcy can teach you a lot about what JCP owns.
When the market values the stock at 3.5 times Ebitda and a lot of the earnings come from shopping mall real estate, it’s incredibly cheap
. Stock is trading at 3.5x EBITDA.
Company did not fire anyone during last few years so that gives it a lot of potential.
Q and A
In 2006, and 2007 Ackman was scared of a catastrophic crash and he was short many financial related companies. However, he never anticipated a global crash on this scale. Now the financial system is massively deleveraged. Banks have been aggressive in writing down assets. In 2006, 2007 Ackman was 22% short highest position ever, today he is only 7 or 8% short.
Ackman is more bullish on the future now. The reason is he cannot find more stocks to short is because many leveraged companies went bankrupt.
Ackman learned a lot of lessons from Sears. He has foresworn investing in controlled companies in the future. One exception is David Einhorn’s Greenlight Re, which Ackman stated he would be happy to own “from infinity to zero.”But in general he wants a good company where he can make changes if needed.
He had a bad experience in Canadian tire which had huge potential but management was unwilling to make changes and had large control of the company.
Ackman was asked a bit about GGP.
Ackman was just made head of the legacy Howard Hughes side of the portfolio.
Ackman explained that General Growth made several large acquisitions.
The problem with some of those assets is that inside a REIT, they won’t build real value.
Summerlin, 7,000 acres of the best real estate in Las Vegas, once owned by Howard Hughes, generated close to $300 million in revenue in 2005 to 2006, but generated no revenue in the past several years.
By spinning Summerlin off from the GGP REIT, into its own separate company, it will be able to generate a good return in the future.
GGP will retain some of the high quality properties with good cash flow, while the spin-off will contain the lesser developed assets.
Ackman was asked about the coming elections, the gridlock in Washington. Ackman responded that this is such a great country it does not matter who wins. The great thing is if one party goes too far the other party wins next election and keeps things in moderation. That is likely to happen when the Republicans win more seats and are able to moderate the current climate in Washington.
Ackman mentioned that he has friend who goes long when Congress is off session and short when Congress is in session. It has been the best performing strategy for the past twenty years. So maybe it is a good to have gridlock.
Ackman is very US centric. Ackman stated several reasons for this. He gets involved in companies and he invests in very few companies. So it is much easier to check US companies. He also understands the US legal system much better as opposed to the legal system in a foreign country.
Ackman stated that one of the key things is to invest in a system and market that you understand.
One of the keys of being successful is allocating your time because there are so many securities and documents to go through. He has a seven person team that helps get through this process. The seven basically do the same thing but try not to overlap.
Disclosure: No positions
http://www.valuewalk.com/
http://twitter.com/#!/valuewalk
Bill Ackman is the Managing Member and Portfolio Manager of Pershing Square Capital Management, L.P., a concentrated research-intensive fundamental value investor in long and occasionally short investments in the public markets. Pershing Square has played an active role in creating value at companies including McDonald’s, Ceridian Corporation, Longs Drugs, Wendy’s International, and General Growth Properties.
Prior to forming Pershing Square, Mr. Ackman co-founded Gotham Partners, L.P., a public and private equity investment partnership. Prior to Gotham Partners, Mr. Ackman began his career in real estate investment banking at Ackman Brothers & Singer, Inc. Mr. Ackman received an MBA from the Harvard Business School and a Bachelor of Arts magna cum laude from Harvard College.
Mr. Ackman’s board memberships include the Board of Dean’s Advisors of the Harvard Business School and a number of not-for-profit boards including the Pershing Square Foundation, a charitable foundation that he founded in 2007.
There is a new book out about Ackman titledConfidence Game
, which details Ackman’s short of MBIA, while simultaneously fighting off regulators who were attempting to “kill the messenger (Ackman)”. Ackman says world is an uncertain place so do not try as an investor to look like an economist. However, Ackman has a view on the macro situation himself which is more bullish than the rest of the speakers.
Ackman is bullish for the following reasons:
Corporate America has become much more lean and efficient. Because of the credit crisis the large companies are extremely well capitalized as they have been hoarding cash.
Cost of debt capital is extremely low, and the securitization market is coming back. Private equity deals are also coming back.
Stock prices are still relatively cheap.
From a corporate point of view it is an attractive environment.
From a consumer point of view many people who were the most levered have deleveraged.
The only thing that is missing is consumer and business confidence.
Houses are the most affordable they have been in many years.
Weak dollar is helping exports.
One big negative is that state, and local governments are in significantly bad shape. There will be overhang for a while.
Ackman spoke about his recent purchase of JC Penny.
JC Penny is very sensitive to economy but price is cheap.
Their real estate portfolio is better than that of competitors.
JCP has significant non-operating assets, which Ackman discovered while researching General Growth Properties.
Their balance sheet is very strong, and they are close to having no net debt within a short time frame. The company has $2 billion in cash.
The General Growth bankruptcy can teach you a lot about what JCP owns.
When the market values the stock at 3.5 times Ebitda and a lot of the earnings come from shopping mall real estate, it’s incredibly cheap
. Stock is trading at 3.5x EBITDA.
Company did not fire anyone during last few years so that gives it a lot of potential.
Q and A
In 2006, and 2007 Ackman was scared of a catastrophic crash and he was short many financial related companies. However, he never anticipated a global crash on this scale. Now the financial system is massively deleveraged. Banks have been aggressive in writing down assets. In 2006, 2007 Ackman was 22% short highest position ever, today he is only 7 or 8% short.
Ackman is more bullish on the future now. The reason is he cannot find more stocks to short is because many leveraged companies went bankrupt.
Ackman learned a lot of lessons from Sears. He has foresworn investing in controlled companies in the future. One exception is David Einhorn’s Greenlight Re, which Ackman stated he would be happy to own “from infinity to zero.”But in general he wants a good company where he can make changes if needed.
He had a bad experience in Canadian tire which had huge potential but management was unwilling to make changes and had large control of the company.
Ackman was asked a bit about GGP.
Ackman was just made head of the legacy Howard Hughes side of the portfolio.
Ackman explained that General Growth made several large acquisitions.
The problem with some of those assets is that inside a REIT, they won’t build real value.
Summerlin, 7,000 acres of the best real estate in Las Vegas, once owned by Howard Hughes, generated close to $300 million in revenue in 2005 to 2006, but generated no revenue in the past several years.
By spinning Summerlin off from the GGP REIT, into its own separate company, it will be able to generate a good return in the future.
GGP will retain some of the high quality properties with good cash flow, while the spin-off will contain the lesser developed assets.
Ackman was asked about the coming elections, the gridlock in Washington. Ackman responded that this is such a great country it does not matter who wins. The great thing is if one party goes too far the other party wins next election and keeps things in moderation. That is likely to happen when the Republicans win more seats and are able to moderate the current climate in Washington.
Ackman mentioned that he has friend who goes long when Congress is off session and short when Congress is in session. It has been the best performing strategy for the past twenty years. So maybe it is a good to have gridlock.
Ackman is very US centric. Ackman stated several reasons for this. He gets involved in companies and he invests in very few companies. So it is much easier to check US companies. He also understands the US legal system much better as opposed to the legal system in a foreign country.
Ackman stated that one of the key things is to invest in a system and market that you understand.
One of the keys of being successful is allocating your time because there are so many securities and documents to go through. He has a seven person team that helps get through this process. The seven basically do the same thing but try not to overlap.
Disclosure: No positions
http://www.valuewalk.com/
http://twitter.com/#!/valuewalk
