How Bill Ackman Made His Billions


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How Bill Ackman made his billions (including his best investments, worst investments, and biggest bets) and what lessons investors can learn from him

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How Bill Ackman Made His Billions

  1. 1. How Bill Ackman Made His Billions
  2. 2. • Raised in Chappaqua, New York • Attended Harvard University • Received Bachelor of Arts degree magna cum laude and an MBA His early years
  3. 3. How he made his fortune • Ackman set up his first hedge fund, Gotham Partners, with a Harvard classmate in 1992 • Fund grew from $3 million to $300 million in less than a decade • Posted impressive returns in the early years • Bought a controlling stake in a money-losing golf course operator • Racked up debt acquiring other golf courses
  4. 4. How he made his fortune • Regulators alleged Gotham Partners used research reports to influence the price of stocks its owned • Investigation went nowhere • Fund was eventually closed and client funds were returned
  5. 5. • Ackman challenged bond insurer MBIA’s AAA credit rating in 2002 • He took a short position and bought credit default swaps against MBIA debt as a way to bet it would crash • When MBIA did, Ackman sold the swaps in 2008 for a huge profit • Ackman founded Pershing Square hedge fund with $54 million in 2004 • Fund holds large positions of stocks in a few sectors • It’s valued at $13 billion today How he made his fortune
  6. 6. • Ackman mostly takes large positions in companies and then agitates for changes to improve returns • He took losses on investments in Borders and Target • Ackman sold his stake in J.C. Penney's last year after resigning from the board and generating a $600+ million loss Bets that didn’t pay off
  7. 7. Ackman’s biggest bet • December 2012: Ackman announced a $1 billion bet against nutritional-supplements maker Herbalife, claiming it was an illegal pyramid scheme • Herbalife’s share price initially dropped • But Herbalife’s stock surged 52% in the 12 months after Ackman initiated his short position • Ackman shifted some of his short bet on Herbalife into put options, a move that could cut his risks
  8. 8. • October 2013: Ackman said accepting losses when necessary makes his firm better • In a letter, Ackman stated, "Confidence and conviction without humility can be dangerous in the investment business” • Federal Trade Commission recently announced it’d begun an official inquiry into Herbalife • Herbalife stock down 34% so far this year • Ackman’s fund still owns a short position Ackman’s biggest bet
  9. 9. Philanthropy • Ackman has joined “The Giving Pledge”, committing to give away at least 50% of his fortune to charity • Other philanthropic heavyweights dedicated to this pledge include billionaires Warren Buffett and Bill Gates
  10. 10. 5 lessons investors can learn from Bill Ackman 1. Use sound research as a basis for your investing thesis 2. If you don’t succeed at first, try again 3. When you make a mistake, ask yourself, “What did I learn?” 4. Don’t be afraid to take a contrarian position 5. Have humility
  11. 11. Download The Motley Fool’s FREE REPORT that taps into the best of billionaire Warren Buffett’s investing tips and wisdom