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Yahoo
3 days ago
- Business
- Yahoo
7 key quotes from investor Bill Ackman that could make you wealthier
Bill Ackman is the billionaire investor behind the hedge fund Pershing Square Capital, and he's one of the most notable investors of the last two decades. Ackman typically bets big, with huge positions in stocks that are often momentarily out of favor or at least those where value has yet to be realized. Ackman often goes to the media to promote his positions, whether that's a long investment or one that he thinks is poised to fall, such as his much-derided bet against Herbalife. While Ackman has demonstrated outsize success, he's not without some high-profile bombs, but either way, he has a brash confidence. For much of his career, he was an activist investor, one who takes stakes in companies and then tries to get them to change, perhaps by selling or spinning off a division, though more recently he's moved on from this approach. Below are seven key investing lessons from Bill Ackman about how to succeed at investing. Ackman believes in the value of running a concentrated investment portfolio, with most of his fund's capital invested in his highest-conviction stocks. 'I think most investors overdiversify because they're lazy,' says Ackman. 'They haven't done enough research into any of their companies. If they've got 200 positions, do you think they know what's going on at any one of those companies at this moment?' Ackman prefers a concentrated portfolio because it can outperform the market. If you select a portfolio of hundreds of stocks, the performance is generally going to look like that of the S&P 500 index, a collection of hundreds of America's top companies. In contrast, if you're picking individual stocks and you're skilled at doing so, you can invest in the top stocks that are poised to outperform — earning returns that beat the market's average return of 10 percent. While diversification may not be attractive to the highly skilled investor, the flip side is that it can be a way for less skilled investors to earn strong returns with little work or knowledge. In fact, legendary investor Warren Buffett says that nearly all investors would be better off just buying and holding an S&P 500 index fund. Did you know? Over time, the S&P 500 has outperformed more than 90 percent of all investors, including the professionals. But for Ackman and other investors looking to outperform, concentration is key. Get matched: Find a financial advisor who can help you maximize your investments It's important to establish an investing process that allows you to be confident, even if you do end up being wrong. With confidence and a good process, you can make hard decisions, such as investing more when a stock declines and the investing world questions your judgment. 'If I believe that I am right, I will take it to the end of the earth until I am proven right,' says Ackman. Ackman has made some great investments over the years, including in once-bankrupt mall owner General Growth Properties, Starbucks and Chipotle. But he's also made some real stinkers, among them a short position on Herbalife, which he notably said he would pursue 'to the end of the earth.' While he lost $1 billion on the trade, he maintained his confidence, even after a very public spat on TV with another great investor, Carl Icahn, who bought shares of Herbalife. But confidence built on a good investing process can help you make a lot of money. It can be easy to get yourself emotionally married to an investment, but Ackman advises against doing so. 'I'm not emotional about investments,' says Ackman. 'Investing is something where you have to be purely rational and not let emotion affect your decision-making — just the facts.' If you're a short-term trader rather than a buy-and-hold investor, you need to constantly evaluate your investments to see whether it's worth your money to buy, sell or hold them, in comparison to other potential investments. Active traders really do need to avoid wedding themselves to a stock, and they must be able to part with it when the risk-reward trade-off becomes unattractive. In contrast, long-term investors in index funds, perhaps in a 401(k) account, may decide to take a different passive approach, since passive investing tends to beat active investing. Still, even a strong long-term investment such as the S&P 500 index isn't a buy at any price. A good investment process focuses on the truth — whether a stock is undervalued, how good the business is and why. An investor tries to identify the underlying reality and where a stock is likely to move over time, even if it's out of favor now or moves unfavorably after a purchase. But in the short term, a stock can do almost anything, depending on how traders are pushing it. 'What the market tells you in the short term is what a certain subset of people believe,' says Ackman. 'That doesn't mean they're right.' Over time, the true value of the company is established as further groups of investors weigh in on the stock. An investor who is focused on finding the truth about a stock can understand better where a stock is likely going over a longer period, even if it's pushed around in the near term. For this reason, it's important to be a fundamental investor by doing research on the business. As an investor, it's important to see what the other side is saying about an investment to come to a better understanding about it and why it may or may not be an attractive purchase. For example, many great investors pay attention to the arguments made by short-sellers — those investors who take a negative position on a stock and profit from its decline. 'The benefit of short-sellers to the markets is they're sort of the canary in the coal mine,' says Ackman. 'They are the early warning signal about a problem in the business, a problem in the capital markets.' Of course, investors don't necessarily have to believe what a short-seller (or any other investor) is saying, but it can be valuable to see what other well-informed investors are saying about a stock. A negative investment report can help you develop a better investment thesis for the stock and discover what you should be watching for there. Unfortunately for Ackman, he didn't listen clearly to other investors in Herbalife, who profited handsomely from his short position. Learn more: How to find the right wealth manager for you Many people invest in order to be part of a community, looking for the ego rewards of participating in a group, but Ackman warns against this kind of emotional decision-making. 'In order to be successful, you have to make sure that being rejected doesn't bother you at all,' says Ackman. To succeed, you need to avoid using investing as a way to stroke your ego. For example, if you just want to be part of the crowd, you'll end up buying investments because they're popular rather than because they offer an attractive reward for the risk. Key insight The best investments are often in out-of-favor sectors, and if you need to be liked as an investor, you'll immediately avoid looking at these potentially blockbuster investments because they're shunned (for now). However, if being part of the crowd — or being against it — is not what's driving your investing process, you may be able to find winning investments in out-of-favor industries. As an investor and just generally in life, it's important to stay optimistic, suggests Ackman. 'I've seen very few people in the world accomplish anything unless they were optimists,' says Ackman. While optimists may be wrong, it's important to get out there and keep trying. The stock market has delivered attractive long-term returns, and you can earn those returns through a simple investment process. But if you're pessimistic, you won't even begin the process of investing. To put this another way, you need to see the connection between your effort and your results. When you begin putting in the right effort, you'll see results over time. Optimism helps you stay motivated to put in the right amount of time and energy while you wait for the results to come. That can be especially important for investing, where it may take years for the results to come from the right effort. But as you can see in the chart for the S&P 500 — up and to the right for decades — if you stay optimistic and keep investing, you can make a lot of money in the market. Learn more: When to get a financial advisor Bill Ackman has been one of the most successful investors for quite a long time, and so it can be valuable to understand his approach and how it may help you become a better investor. While Ackman's insights are often more targeted to active or professional investors, even beginning or passive investors can take away some insights from how this billionaire invests. Editorial Disclaimer: All investors are advised to conduct their own independent research into investment strategies before making an investment decision. In addition, investors are advised that past investment product performance is no guarantee of future price appreciation.
Yahoo
11-02-2025
- Business
- Yahoo
Billionaire Bill Ackman Just Bought $2.3 Billion Worth of This Incredible Growth Stock, Which Could Make It His Hedge Fund's Biggest Bet
Bill Ackman is one of the most widely followed investment managers in the world. He's in charge of Pershing Square Capital, a hedge fund focused on investing in just a handful of Ackman's best ideas. His highly concentrated portfolio is full of great companies, but he might have just made one stock the biggest holding at Pershing Square. Starting in January, Ackman and his team strategically acquired 30.3 million shares of Uber Technologies (NYSE: UBER). Those shares are worth over $2.3 billion as of this writing, as the news of Ackman's position sent shares higher. Based on Pershing Square's positions disclosed in its most recent 13-F filing (as of Sept. 30) with the Securities and Exchange Commission, Uber could now be Pershing Square's largest equity holding. In a post on X revealing his position, Ackman praised Uber CEO Dara Khosrowshahi. He said Khosrowshahi "has done a superb job in transforming the company into a highly profitable and cash-generative growth machine." Indeed, since getting behind the wheel as Uber CEO in 2017, the company has gone from burning $1.5 billion in cash per year to generating over $7 billion in operating cash flow in 2024. Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) went from negative $2.6 billion in 2017 to positive $6.5 billion in 2024. It's also been profitable on a generally accepted accounting principles (GAAP) basis since 2023. And Ackman thinks there's still a lot of growth left to come for Uber. "Remarkably, it can still be purchased at a massive discount to its intrinsic value," he wrote. Even after the increase in share price following Ackman's announcement, Uber shares trade for an enterprise value of 0.9 times its 2024 gross bookings. Management expects gross bookings to grow 18% in the first quarter of 2025 as well. Enterprise value-to-EBITDA, a more traditional valuation measure, has shares trading at a multiple of less than 18 times analysts' 2025 expectations. Management expects 30% to 37% growth in EBITDA in the first quarter. Uber's management has done a great job of steering the company toward profitability and driving it forward. The stock valuation looks attractive as well. Importantly, it has a big competitive advantage that should protect it from competition entering the market in the future. One thing Khosrowshahi has done at Uber is transform the company from a company focused primarily on ride-sharing to one that matches customers with drivers to move anything from point A to point B. The company also folded Uber Eats into the main Uber app and made several strategic acquisitions in delivery and logistics. The results have been phenomenal. Since Khosrowshahi took over in 2017, Uber has grown from 62 million monthly active platform consumers to 171 million as of the end of 2024. That customer base has attracted more restaurants, stores, and drivers to its platform, in turn making Uber more useful for customers and spinning the flywheel faster. As a result, it's taken share from smaller rival Lyft over the last few years despite already being much larger. And Uber's size advantage should continue to push its market share higher. There's a good reason Uber's valuation is higher than Lyft's. Many see autonomous vehicles (AVs) as a threat to Uber, but Uber's position as the ride-hailing app could make it an indispensable part of the AV ecosystem. If a company like Alphabet's Waymo wants to serve a new market, its easiest path forward is to partner with Uber. And that's exactly what it's doing this year in Austin and Atlanta. There's no need for an AV company to partner with a smaller network operator like Lyft. So, not only does Uber look undervalued based on its current position in the ride-sharing industry, but it could also see its position cemented as the market shifts to more AVs in search of riders. As such, it may be worth following Ackman into the stock, even after the price spiked on the news of his purchase. Ever feel like you missed the boat in buying the most successful stocks? Then you'll want to hear this. On rare occasions, our expert team of analysts issues a 'Double Down' stock recommendation for companies that they think are about to pop. If you're worried you've already missed your chance to invest, now is the best time to buy before it's too late. And the numbers speak for themselves: Nvidia: if you invested $1,000 when we doubled down in 2009, you'd have $336,677!* Apple: if you invested $1,000 when we doubled down in 2008, you'd have $43,109!* Netflix: if you invested $1,000 when we doubled down in 2004, you'd have $546,804!* Right now, we're issuing 'Double Down' alerts for three incredible companies, and there may not be another chance like this anytime soon.*Stock Advisor returns as of February 3, 2025 Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Adam Levy has positions in Alphabet. The Motley Fool has positions in and recommends Alphabet and Uber Technologies. The Motley Fool has a disclosure policy. Billionaire Bill Ackman Just Bought $2.3 Billion Worth of This Incredible Growth Stock, Which Could Make It His Hedge Fund's Biggest Bet was originally published by The Motley Fool Sign in to access your portfolio
