Investment

Hedge fund billionaire Bill Ackman lays down his investing ‘commandments’

Published

1 year ago

September 11, 2023

If you’ve got a portfolio headache on your hands, don’t worry—legendary investor Bill Ackman says it’ll soon become a “blip.”

The hedge fund manager, who founded Pershing Square Capital in 2004 and serves as its CEO, has built up a fortune of $3.7 billion during his decades-long career, according to Forbes.

However, it hasn’t always been smooth sailing for Ackman, who has made bets that both won and lost him billions of dollars.

But in a recent interview, he said looking back over the past two decades reinforces his belief that investing can be fairly straightforward if some simple principles are followed.

Ackman, a Harvard Business School graduate, has such faith in his rules of investing that they’re engraved in a stone tablet and placed on the desk of every employee at Pershing Square Capital’s New York base.

Speaking to The Julia La Roche Show in an interview published last week, Ackman said he was a “big believer” in strategy and maintaining focus on longer-term outcomes.

“If you look at the chart of Pershing Square over time, the difficult periods look like nothing now,” he said. “You won’t even notice the little blip in a decade or two decades, and you just have to have that kind of perspective.”

Pershing Square’s results last year could be the perfect example of why Ackman advocates for a wider lens perspective.

In 2022, the hedge fund posted an 8.8% decline as stocks suffered their worst year since the Financial Crisis—but that loss followed three consecutive years of double-digit gains: 26.9% in 2021, 70.2% in 2020, and a 58.1% spike in 2019.

In last week’s interview, Ackman also explained his “basic commandments” for investing.

“We want to buy the best businesses in the world,” he said.

He described these as firms that are “simple, predictable, free-cash-flow generative, dominant companies with, as Warren Buffett would say, a moat around them.”

The economic moat theory, which was popularized by the Berkshire Hathaway chairman, refers to a business’s ability to maintain an advantage over its competitors in order to protect its market share and long-term financial outlook.

Also on the Pershing Square checklist is a strong balance sheet and excellent governance.

“The short version of the principles are own the best, super-durable companies you can find with conservative balance sheets,” Ackman said. “Buy them at attractive prices, and use our influence to make sure they’re managed and governed correctly. That’s it, pretty simple.”

It’s a tactic that appears to have worked: According to financial services publication Seeking Alpha, Pershing Square has outperformed the S&P 500 over the past 20 years, growing its investments at an annual rate of 16.1%.

Investing can be ‘very simple’

While his “commandments” are a simple enough list, Ackman revealed he rarely finds businesses that tick every box for a fair price.

And although Ackman knows what he is looking for, he also revealed the red flag he doesn’t want to see from businesses: “You don’t want a company that has to constantly raise money in order to implement a business plan.”

It’s avoiding these short-term hiccups and focusing on the long term that’s key to Ackman’s strategy, he added.

“Stay away from shorting stocks, avoid commodity-sensitive industries, and you do great,” he advised. “There’s a part of investing that’s very simple…Just make sure you think about the potential for disruption, because we’re in a world where technology is a very dynamic force.”

Ackman, who has previously said he looks up to fellow billionaire investor and “mentor” Warren Buffett, appears to be taking a lesson from the Buffett school of thinking when it comes to the simplicity of his “commandments.”

Buffett himself has also given out notably simple investment advice in the past.

“The first rule of an investment is ‘don’t lose money,’” Buffett once said. “And the second rule of an investment is ‘don’t forget the first rule.’ And that’s all the rules there are.”

Source link

Investment

Tesla shares soar more than 14% as Trump win is seen boosting Elon Musk’s electric vehicle company

Published

3 days ago

November 6, 2024

Anne Joseph

NEW YORK (AP) — Shares of Tesla soared Wednesday as investors bet that the electric vehicle maker and its CEO Elon Musk will benefit from Donald Trump’s return to the White House.

Tesla stands to make significant gains under a Trump administration with the threat of diminished subsidies for alternative energy and electric vehicles doing the most harm to smaller competitors. Trump’s plans for extensive tariffs on Chinese imports make it less likely that Chinese EVs will be sold in bulk in the U.S. anytime soon.

“Tesla has the scale and scope that is unmatched,” said Wedbush analyst Dan Ives, in a note to investors. “This dynamic could give Musk and Tesla a clear competitive advantage in a non-EV subsidy environment, coupled by likely higher China tariffs that would continue to push away cheaper Chinese EV players.”

Tesla shares jumped 14.8% Wednesday while shares of rival electric vehicle makers tumbled. Nio, based in Shanghai, fell 5.3%. Shares of electric truck maker Rivian dropped 8.3% and Lucid Group fell 5.3%.

Tesla dominates sales of electric vehicles in the U.S, with 48.9% in market share through the middle of 2024, according to the U.S. Energy Information Administration.

Subsidies for clean energy are part of the Inflation Reduction Act, signed into law by President Joe Biden in 2022. It included tax credits for manufacturing, along with tax credits for consumers of electric vehicles.

Musk was one of Trump’s biggest donors, spending at least $119 million mobilizing Trump’s supporters to back the Republican nominee. He also pledged to give away $1 million a day to voters signing a petition for his political action committee.

In some ways, it has been a rocky year for Tesla, with sales and profit declining through the first half of the year. Profit did rise 17.3% in the third quarter.

The U.S. opened an investigation into the company’s “Full Self-Driving” system after reports of crashes in low-visibility conditions, including one that killed a pedestrian. The investigation covers roughly 2.4 million Teslas from the 2016 through 2024 model years.

And investors sent company shares tumbling last month after Tesla unveiled its long-awaited robotaxi at a Hollywood studio Thursday night, seeing not much progress at Tesla on autonomous vehicles while other companies have been making notable progress.

Tesla began selling the software, which is called “Full Self-Driving,” nine years ago. But there are doubts about its reliability.

The stock is now showing a 16.1% gain for the year after rising the past two days.

Source link

Investment

S&P/TSX composite up more than 100 points, U.S. stock markets mixed

Published

3 weeks ago

October 16, 2024

Anne Joseph

TORONTO – Canada’s main stock index was up more than 100 points in late-morning trading, helped by strength in base metal and utility stocks, while U.S. stock markets were mixed.

The S&P/TSX composite index was up 103.40 points at 24,542.48.

In New York, the Dow Jones industrial average was up 192.31 points at 42,932.73. The S&P 500 index was up 7.14 points at 5,822.40, while the Nasdaq composite was down 9.03 points at 18,306.56.

The Canadian dollar traded for 72.61 cents US compared with 72.44 cents US on Tuesday.

The November crude oil contract was down 71 cents at US$69.87 per barrel and the November natural gas contract was down eight cents at US$2.42 per mmBTU.

The December gold contract was up US$7.20 at US$2,686.10 an ounce and the December copper contract was up a penny at US$4.35 a pound.

This report by The Canadian Press was first published Oct. 16, 2024.

Companies in this story: (TSX:GSPTSE, TSX:CADUSD)

Source link

Economy

S&P/TSX up more than 200 points, U.S. markets also higher

Published

4 weeks ago

October 11, 2024

Anne Joseph

TORONTO – Canada’s main stock index was up more than 200 points in late-morning trading, while U.S. stock markets were also headed higher.

The S&P/TSX composite index was up 205.86 points at 24,508.12.

In New York, the Dow Jones industrial average was up 336.62 points at 42,790.74. The S&P 500 index was up 34.19 points at 5,814.24, while the Nasdaq composite was up 60.27 points at 18.342.32.

The Canadian dollar traded for 72.61 cents US compared with 72.71 cents US on Thursday.

The November crude oil contract was down 15 cents at US$75.70 per barrel and the November natural gas contract was down two cents at US$2.65 per mmBTU.

The December gold contract was down US$29.60 at US$2,668.90 an ounce and the December copper contract was up four cents at US$4.47 a pound.

This report by The Canadian Press was first published Oct. 11, 2024.

Companies in this story: (TSX:GSPTSE, TSX:CADUSD)

Source link