Bill Ackman, the notorious investor and CEO of Pershing Square, is a name that would certainly come up in a discussion about activist investing. Mr. Ackman has run several successful activist campaigns and made significant profits on bets like Canadian Pacific Railway Limited (USA) (NYSE:CP). However, last year has been particularly successful for Pershing Square as the fund grew to over $18 billion in assets, from $11.5 billion over the course of 2014. In a recent interview on Bloomberg Television, Mr. Ackman has discussed his investment strategy, as well as provided its opinion regarding oil prices decline and mentioned that he was considering investing in the UK retailer Tesco PLC (LON:TSCO), among other things.
One of the main causes of this growth is its investment in botox-maker Allergan, Inc. (NYSE:AGN), which Mr. Ackman tried to acquire jointly with Valeant Pharmaceuticals Intl Inc (NYSE:VRX). However, even though, after a pretty rough proxy fight, Allergan was sold to Actavis plc (NYSE:ACT) instead of Valeant, Mr. Ackman still made a ton of money on its 9.7% stake in the company, as the stock gained 50% during the April-November period as story involving the sale of Allergan was developing.
During his interview with Bloomberg TV’s Francine Lacqua and Guy Johnson Mr. Ackman stated that the main target of Pershing Square’s investment strategy are high quality companies that run a predictable business model and are capable of generating free cash flow. Moreover, Pershig Square also prefers to invest in companies that are not exposed to commodity prices and have unique assets and long-term contracts, among other factors.
“And we’re looking for a business like that that’s lost its way. Perhaps the costs are now out of line; they’ve not allocated capital effectively. They might have hidden assets that are misunderstood by the market. And we can buy a large stake and sit down with management and help make the business more successful,” Mr. Ackman said.
The investor has also mentioned the latest development in the history of his firm, as Pershing Square Holdings Ltd (AMS:PSH) went public on Amsterdam Stock Exchange in October. Since its IPO, the stock gained around 8%, but Mr. Ackman stated that it trades at around 10% discount to book value. Moreover, he said that the company has had an 11-year record of compounting its equity at 23%
The CEO of Pershing Square Holdings Ltd (AMS:PSH) also discussed his interest in some large UK companies and mentioned that Pershing Square “did look at Tesco.”
“But we’ve had our difficulties with retail and a lot of structural changes going on that make that a more difficult business. We look occasionally at companies in the U.K,” he added.
As a side note, we would like to remind that the stock of one of the largest UK retailers Tesco PLC (LON:TSCO) plunged by 44% over the course of 2014, after the company discovered that it has overstated its profit guidance for the first half of 2014 by around $400 million. A significant stake in the company at that time was held by Warren Buffett‘s Berkshire Hathaway (3.7%). The $1.7 billion investment costed Berkshire around $750 million as it exited the position, which also made Mr. Buffett to admit that it “was a huge mistake.”