🗞 Bill Ackman's Road to Riches

Happy Sunday!

Here’s what’s on the docket for this week’s newsletter:

• 💼 Bill Ackman’s Best Investments Ever

• 📈 Legendary Investors Latest Buys

Let’s dive in!

Featured Story #1

Bill Ackman’s Road to Riches

After a series of ill-fated golf course investments led to the unwind of Bill Ackman’s first investment fund in 2003, the 38 year old renowned portfolio manager decided it was time to restart from square one.

In January of 2004, with the scars of his last fund still fresh, Bill Ackman launched Pershing Square Capital Management.

Fast forward two decades and Pershing Square has returned nearly 2,000% since inception, trouncing the returns of the S&P 500 Index Fund.

To dissect these returns further, it’s helpful to take a look at some of Pershing Square's biggest winners over the last 20 years.

Pershing Square’s Best All-Time Investments

1.) General Growth Properties

In 2009, during the depths of the great financial crisis, Pershing Square purchased a $60 million position in General Growth Properties which was the 2nd largest shopping mall operator in the US at the time.

Plagued by a significant debt-load and an inability to refinance due to the collapse of the mortgage-backed securities market, Ackman encouraged the company to file for Chapter 11 bankruptcy protection.

While many shareholders ran for the hills at the prospect of "bankruptcy", Ackman knew that Chapter 11 would give the company the ability to extend their debt maturities.

After buying more time, General Growth sold off some assets and was able to emerge from bankruptcy within 8 months. By 2011, Ackman's $60 million investment had turned into $1.6 billlion, helping Pershing Square deliver a 29% net return in 2010.

2.) Chipotle

In September of 2016, Bill Ackman took a $1.2 billion stake in the fast-casual dining operator Chipotle Mexican Grill.

At the time, the stake amounted to 9.9% of the company, and Chipotle was in the midst of a crisis. Following an E-Coli outbreak across a number of its locations, consumer confidence in the brand was low and shares had dropped by more than 40% from highs.

But Ackman believed the company could revive the brand. Ackman, who had secured 2 seats on Chipotle's board, brought in Brian Niccol as the company's new CEO. Under Niccol's leadership, Chipotle doubled down on food safety, cleaning its restaurants, digital orders, and limited-time menu items. Through this combination of improvements, Chipotle was able to restore trust and get traffic in its stores growing again.

Since Ackman's initial purchase, Chipotle has become one of the most profitable quick service restaurant operators globally helping shares climb ~600%.

3.) A 100X COVID Hedge

Throughout Bill Ackman’s career, he’s been best known for buying and holding undervalued securities, not hedging. So in early 2020, when Bill Ackman announced that Pershing Square had put on $27 million in hedges, it seemed a little out of the ordinary.

To be more specific, Bill Ackman had purchased $27 million worth of credit default swaps against high-yield and investment-grade bond indexes. In other words, Ackman made a ultra high-risk bet that on the volatility of some of the safest assets available to investors.

As the pandemic spread and fears worsened, these hedges paid off in a huge way. Ackman sold his $27 million worth of credit default swaps for ~$2.6 billion, netting Pershing Square a nearly 100-fold return on its investment in just a matter of months. This ultimately shielded Pershing Square investors from the major drawdowns in the rest of the funds holdings.

Bill Ackman’s Current Holdings:

Featured Story #2

Legendary Investors Latest Buys

Last week was 13F season. That means many of the world’s best investors were required to report their latest holdings to the public.

Here are 6 of the most interesting buys:

1.) Stan Druckenmiller - Duquesne Family Office

Stan Druckenmiller increased his position in DNA-testing company Natera by 80%. This is now his largest position by far making up more than 15% of his overall portfolio.

2.) Chuck Akre - Akre Capital Management

Akre capital management reduced the size of most of the firm’s positions during the quarter, but added aggressively to one stock, AirBnB. Akre nearly tripled their stake in the home sharing marketplace during the quarter.

AirBnB now accounts for just under 3% of Akre Capital Management’s overall portfolio.

3.) Dev Kantesaria - Valley Forge Capital Management

Dev Kantesaria runs a highly selective fund that’s known for having very few transactions. Yet, Valley Forge doubled their position in ASML during the quarter.

4.) Warren Buffett - Berkshire Hathaway

It’s news any time the Oracle of Omaha starts buying a company and this quarter was no exception. Throughout Q3 Berkshire started two new positions, Domino’s Pizza and Pool Corporation.

After news broke that Berkshire now owns 3.7% of Domino’s, the company’s shares have jumped by more than 5%.

5.) Pat Dorsey - Dorsey Asset Management

Pat Dorsey is famous for influential work on analyzing MOATs. This quarter, his fund initiated a new position in AppLovin and has already made it 10% of his entire portfolio.

6.) Dennis Hong - Shawspring Partners

Dennis Hong is a renowned software investor and this quarter his fund increased its position in the construction software provider Procore by 493%. The position now accounts for 11% of his overall fund.

Meme of the week

Bitcoin once again hit new all-time highs this week, reaching a peak of just over $99,436 on Friday.

With the cryptocurrency’s total market cap nearing $2 trillion, this meme certainly deserved a spot in this week’s newsletter.