Home Money MIDAS SHARE TIPS UPDATE: Pershing Square keeps getting better

MIDAS SHARE TIPS UPDATE: Pershing Square keeps getting better

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Robust record: Bill Ackman



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Robust record: Bill Ackman

Robust record: Bill Ackman

Bill Ackman built his reputation as a rabble-rouser by advocating for change in some of the most high-profile corporate crises of the past two decades. Recently, he has taken his boxing skills to academia, calling out anti-Semitism at American colleges and fighting accusations of plagiarism against his wife, Neri Oxman, a former college professor.

These battles have earned Ackman new friends and fierce enemies. Fortunately for Pershing Square Holdings shareholders, however, these do not appear to have affected the American billionaire’s ability to make money.

Midas recommended Pershing Square in January 2023, when shares were at £28.95. They have since risen by almost 40 per cent to £40.10 – and moves are afoot to push the price even higher.

Pershing Square invests in large, publicly traded companies, such as Hilton Hotels, Universal Music and the Mexican fast food chain Chipotle. The portfolio is deliberately kept small and includes between eight and twelve holdings at a time, but the individual holdings are large and managers spend months deliberating on new investments.

Last year, the group made one new purchase, acquiring shares of Alphabet when the stock was under pressure and profiting when the price recovered. One or two new investments are likely to take place this year, in addition to a number of sales.

Ackman sold US DIY chain Lowe’s last fall at an average selling price of $221 (£175) per share, down from the $86 price at which the shares were bought in 2018. Not every investment in Pershing generates such good returns. But there are more successes than failures.

Over the past five years, the group’s asset values ​​have risen by an average of more than 30 percent annually, surpassing the FTSE 100 index and the S&P 500 in America.

Returns can also be boosted by opportunistic hedging tactics, such as protecting the portfolio from risk just before Covid-19 reached pandemic status, or protecting against inflation last year.

Critics have complained that Pershing Square’s fees are too high, particularly a performance fee given to investment managers when the stocks in the portfolio do well.

Returns are calculated net of fees, but Ackman is now responding to critics through a series of initiatives that should significantly reduce costs over time.

Despite a robust track record, Ackman is also looking for private companies to take public. Pershing Square Holdings will invest in these companies if Ackman succeeds.

Pershing Square trades at a 27 percent discount to the value of its assets. These are collectively valued at £54.91 per share, compared to the share price of £39.86. The discount has narrowed over the past year, but Ackman remains dissatisfied. Fee reductions could help, supported by continued results from Pershing’s portfolio companies.

Midas judgment: Pershing Square has proven its worth over the past year and some investors may now opt for the exit. But Ackman continues to invest heavily in this sector and recent initiatives should pay off. That makes the stock worth holding at £39.86.

Traded on: Main market ticker: PSH Contact: pershingsquareholdings.com or Camarco on 020 7357 4980

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