Bill Ackman: get ready for the bargains of a lifetime

Hedge fund manager Bill Ackerman is turning bullish and putting his money into bargain stocks.

Bill Ackman, founder, Pershing Square

Hedge-fund manager Bill Ackman has had “a few rough years”, says Matt Levine on Bloomberg. His woes included a $4bn loss on Valeant Pharmaceuticals (the firm’s shares fell 90% amid drug-pricing scandals and accounting fraud) and a $1bn loss on supplement firm Herbalife (Ackman argued it was a pyramid scheme and shorted it, the stock kept going up). But the coronavirus crisis has been good to him. “You don’t make a 10,000% return in 20 days very often,” yet that’s what Ackman has managed with one well-timed trade. 

In February, his Pershing Square hedge fund purchased credit default swaps (a derivative that pays out if a bond defaults) on several bond indices. Under these, Pershing Square would pay $27m per month for five years, but would receive a large payment if companies in the index defaulted. As the crash worsened, fears about defaults rose and the value of these positions soared. After one month, he closed the trade, pocketing $2.6bn. 

Rather than sitting on the cash and waiting for the crisis to pass, he’s already turning bullish. Much of the proceeds have already been invested in stocks such as hotel group Hilton, retailer Lowe’s and cafe chain Starbucks, says Ackman in a letter to investors. He’s kept about 17% of his portfolio in cash, in case volatile markets create new opportunities, but he argues a 30-day shutdown of the economy will bring the virus under control. “That’s why we are buying stocks,” he added on Twitter. “These are the bargains of a lifetime if we manage this crisis correctly.”

Recommended

The MoneyWeek Podcast: Sebastian Lyon on the benefits of being boring
Investment strategy

The MoneyWeek Podcast: Sebastian Lyon on the benefits of being boring

Merryn talks to Sebastian Lyon, founder and CEO of Troy Asset Management and manager of Personal Assets Trust, on his “boring” approach to asset manag…
3 Sep 2021
The US is in one of the greatest bubbles in financial history
Investment gurus

The US is in one of the greatest bubbles in financial history

Jeremy Grantham, who has a history of getting big calls right, fears slumps in several wildly overpriced markets (including UK property). He tells Mer…
3 Sep 2021
Jeremy Grantham, we're in one of the greatest bubbles in financial history
Investment strategy

Jeremy Grantham, we're in one of the greatest bubbles in financial history

Merryn talks to Jeremy Grantham of GMO about the current state of the markets and where investors can "hide" from all the craziness, plus inequality, …
5 Aug 2021
Mayssa Al Midani: agritech, nutrition and climate change – feeding the world while caring for the planet
Global Economy

Mayssa Al Midani: agritech, nutrition and climate change – feeding the world while caring for the planet

Merryn talks to Mayssa Al Midani of the Pictet Nutrition fund about how she invests in feeding the world's expanding population in a sustainable way, …
4 Jun 2021

Most Popular

The times may be changing, but don’t change how you invest
Small cap stocks

The times may be changing, but don’t change how you invest

We are living in strange times. But the basics of investing remain the same: buy fairly-priced stocks that can provide an income. And there are few be…
13 Sep 2021
Two shipping funds to buy for steady income
Investment trusts

Two shipping funds to buy for steady income

Returns from owning ships are volatile, but these two investment trusts are trying to make the sector less risky.
7 Sep 2021
Should investors be worried about stagflation?
US Economy

Should investors be worried about stagflation?

The latest US employment data has raised the ugly spectre of “stagflation” – weak growth and high inflation. John Stepek looks at what’s going on and …
6 Sep 2021