Whitney Tilson, hedge fund manager at Case Capital and long-time friend of fellow hedge fund manager penned this note to his followers in response to Joe Nocera's op-ed on Ackman:
The more I think about Joe Nocera’s op ed in yesterday’s NY Times about Bill Ackman, Activism Gone Wild (full text below), the more irritated I get (full disclosure: Bill and I have been good friends since college 27 years ago and I’m on the board of his foundation, but I didn’t communicate with him about the op ed or this email before I sent it).
Since when is possibly screwing up one investment (while things are grim at JC Penney, it’s not clear that the final chapter has been written) a crime worthy of being pilloried on the op ed page of the world’s leading newspaper?! Among other things, this is Monday morning quarterbacking at its worst.
While this is an opinion piece, and Nocera is entitled to his opinions, he has this one very wrong in many ways:
A) The headline, Activism Gone Wild. By making the obvious analogy to the Girls Gone Wild video series, Nocera is insinuating that Ackman’s activism is out-of-control, cheap, tawdry, and unserious. Agree or disagree with particular investments, Ackman has a long, credible, and extremely successful history of activism, as Nocera acknowledges: “his track record as an activist has been good; you don’t get $12 billion in assets if you don’t win more than you lose.”
B) In his second sentence, Nocera writes: “On one shoulder sits an angel, encouraging his better nature. On the other sits a devil, whispering temptation.” Now we’ve gone from Girls Gone Wild to Animal House! This is just dumb – there’s no other word for it. Ackman’s investments have nothing to do with his “better nature” vs. the devil within him “whispering temptation”. Rather, like every sensible investor, Ackman does a lot of work on a lot of companies and invests in a small number based on his analysis of risk and reward – not devils whispering in his ears! Some of these investments work out and some don’t – duh!
C) Later in the column, after writing a few nice things about Ackman’s philanthropy and activism in Herbalife, Nocera turns to JC Penney and writes: “Being a big-time activist-investor, Ackman could hardly allow Ullman to remain at the helm.” Putting aside the sardonic tone, Nocera is just wrong on the facts: Ackman has been an activist numerous times and only a few times has he pressed to remove the CEO.
D) In the next sentence, Nocera writes: “Activists have to be, you know, active.” How does Nocera reconcile heaping scorn on all activists with his earlier statement that Ackman’s “track record as an activist has been good”? As I’ve written many times before, we need MORE investors – who are, after all, the owners of every public company – to start behaving like owners, not renters. Realistically, most won’t, so it’s VERY healthy for our markets and our economy that activists like Ackman, with real resources, are out there challenging even our largest companies like Apple, Yahoo, McDonald’s, Canadian Pacific, and others. Sadly, articles like Nocera’s make this less likely – who needs this kind of attack?
E) Speaking of Canadian Pacific (a stock I own, incidentally), how did Nocera fail to mention this Ackman activist situation that has so many parallels with JC Penney (and took place over roughly the same time period)? Both businesses had been underperforming for a long time and were run by mediocre CEOs and complacent boards, so Ackman acquired a large stake and, among other things, scoured the world for the person he thought would be the very best CEO and hired him.
In the case of CP, Ackman was instrumental in hiring Hunter Harrison, a legend in the railroad industry for the remarkable turnarounds he led at Illinois Central and Canadian National. The stock has more than doubled, unlocking more than $10 billion of value for shareholders (more than three times JC Penney’s loss in market value since Ackman invested), and Canada’s ROB Magazine named Ackman its 2012 CEO of the Year.
While things haven’t worked out so far in the case of JC Penney and Ron Johnson, it was by no means obvious (contrary to Nocera’s Monday morning quarterbacking) that Johnson was the wrong person at the time he was hired. In fact, it was viewed as a brilliant coup and the stock soared.
PS—I hate to go after Nocera like this because in general I’m a huge fan of his excellent work over the years. His prior column on The New Russian Mob, for example, was first rate.
Sincerely yours,
Whitney Tilson
The more I think about Joe Nocera’s op ed in yesterday’s NY Times about Bill Ackman, Activism Gone Wild (full text below), the more irritated I get (full disclosure: Bill and I have been good friends since college 27 years ago and I’m on the board of his foundation, but I didn’t communicate with him about the op ed or this email before I sent it).
Since when is possibly screwing up one investment (while things are grim at JC Penney, it’s not clear that the final chapter has been written) a crime worthy of being pilloried on the op ed page of the world’s leading newspaper?! Among other things, this is Monday morning quarterbacking at its worst.
While this is an opinion piece, and Nocera is entitled to his opinions, he has this one very wrong in many ways:
A) The headline, Activism Gone Wild. By making the obvious analogy to the Girls Gone Wild video series, Nocera is insinuating that Ackman’s activism is out-of-control, cheap, tawdry, and unserious. Agree or disagree with particular investments, Ackman has a long, credible, and extremely successful history of activism, as Nocera acknowledges: “his track record as an activist has been good; you don’t get $12 billion in assets if you don’t win more than you lose.”
B) In his second sentence, Nocera writes: “On one shoulder sits an angel, encouraging his better nature. On the other sits a devil, whispering temptation.” Now we’ve gone from Girls Gone Wild to Animal House! This is just dumb – there’s no other word for it. Ackman’s investments have nothing to do with his “better nature” vs. the devil within him “whispering temptation”. Rather, like every sensible investor, Ackman does a lot of work on a lot of companies and invests in a small number based on his analysis of risk and reward – not devils whispering in his ears! Some of these investments work out and some don’t – duh!
C) Later in the column, after writing a few nice things about Ackman’s philanthropy and activism in Herbalife, Nocera turns to JC Penney and writes: “Being a big-time activist-investor, Ackman could hardly allow Ullman to remain at the helm.” Putting aside the sardonic tone, Nocera is just wrong on the facts: Ackman has been an activist numerous times and only a few times has he pressed to remove the CEO.
D) In the next sentence, Nocera writes: “Activists have to be, you know, active.” How does Nocera reconcile heaping scorn on all activists with his earlier statement that Ackman’s “track record as an activist has been good”? As I’ve written many times before, we need MORE investors – who are, after all, the owners of every public company – to start behaving like owners, not renters. Realistically, most won’t, so it’s VERY healthy for our markets and our economy that activists like Ackman, with real resources, are out there challenging even our largest companies like Apple, Yahoo, McDonald’s, Canadian Pacific, and others. Sadly, articles like Nocera’s make this less likely – who needs this kind of attack?
E) Speaking of Canadian Pacific (a stock I own, incidentally), how did Nocera fail to mention this Ackman activist situation that has so many parallels with JC Penney (and took place over roughly the same time period)? Both businesses had been underperforming for a long time and were run by mediocre CEOs and complacent boards, so Ackman acquired a large stake and, among other things, scoured the world for the person he thought would be the very best CEO and hired him.
In the case of CP, Ackman was instrumental in hiring Hunter Harrison, a legend in the railroad industry for the remarkable turnarounds he led at Illinois Central and Canadian National. The stock has more than doubled, unlocking more than $10 billion of value for shareholders (more than three times JC Penney’s loss in market value since Ackman invested), and Canada’s ROB Magazine named Ackman its 2012 CEO of the Year.
While things haven’t worked out so far in the case of JC Penney and Ron Johnson, it was by no means obvious (contrary to Nocera’s Monday morning quarterbacking) that Johnson was the wrong person at the time he was hired. In fact, it was viewed as a brilliant coup and the stock soared.
PS—I hate to go after Nocera like this because in general I’m a huge fan of his excellent work over the years. His prior column on The New Russian Mob, for example, was first rate.
Sincerely yours,
Whitney Tilson
