Bill Ackman's Bright Ideas

by: The Manual of Ideas

Why follow Bill Ackman?

Ackman, managing member of Pershing Square Capital, is a value-oriented activist investor. He runs a concentrated portfolio with the largest ten equity investments accounting for the vast majority of his long book. Before the credit crunch developed into a full-blown economic crisis, Ackman made a strong case for why MBIA (NYSE: MBI) and AMBAC (NYSE: ABK) were overvalued and fundamentally more distressed than the market had judged at the time. On the long side, Ackman has approached large companies, including McDonald’s (NYSE: MCD) and Target (NYSE: TGT), with sensible proposals for unlocking latent shareholder value. To watch Charlie Rose’s November 2008 interview with Bill Ackman, click here.

The Manual of Ideas estimates that Bill Ackman’s top three ideas at this time are General Growth Properties (NYSE: GGP), Visa (NYSE: V) and Target (NYSE: TGT). Our analysis is based on a recent Form 13F-HR filed by Pershing Square. We also consider Pershing Square’s past 13F-HR filings, recent 13G and 13D filings as well as the latest market prices of the portfolio holdings. Please see below for an explanation of the MOI Signal Rank™ methodology.

MOI Signal Rank™ – Top Current Ideas of Pershing Square

Portfolio Metrics

Portfolio Size $2.4 billion
Top 10 Holdings % of Portfolio 100%
Median Market Cap ($mn) $3.2 billion
Average Market Cap ($mn) $10.5 billion
Average Dividend Yield 1%
Average P/E 18x
Average P/B 1.7x

Selected New Positions

  • General Growth Properties
  • Alexander’s (NYSE:ALX)

Selected Sold-Out Positions

  • American International Group (NYSE: AIG)
  • Barnes & Noble (NYSE: BKS)
  • Mastercard (NYSE: MA)

About MOI Signal Rank

MOI Signal Rank answers the question, “What are this investor’s top ideas right now?” Rather than simply presenting each investor’s largest holdings as of the recently filed quarter end, MOI’s proprietary methodology ranks the companies based on the investor’s current level of conviction in each holding, as judged by The Manual of Ideas.

Our proprietary methodology takes into account a number of variables, including the size of a position in an investor’s portfolio, the size of a position relative to the market value of the corresponding company, the most recent quarterly change in the number of shares owned, and the change in the stock price of a position since the most recent quarterly filing date.

For example, an investor might have the most conviction in a position that is only the tenth-largest position in such investor’s portfolio. This might be the case if an investor invests in a small company, resulting in a holding that is simply too small to rank highly based on size alone. On the other hand, such a holding might represent 19.9% of the shares outstanding of the subject company, suggesting a high level of conviction. Our estimate of the conviction level would rise further if the subject company has a 20% poison-pill threshold, thereby suggesting that the investor has bought as much of the subject company as is practically feasible.

Disclosure: None.

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