Major investor: Bill Ackman
Giles and Nick English grew up around airplanes. Their father was a former RAF pilot and flying is in their blood. Timepieces are too, with the eldest Englishman often bringing old clocks home for his sons to tinker with and repair. In 2002, the brothers combined these two passions with the launch of Bremont, a company specializing in watches for pilots and soldiers. Today, Bremont watches sell for thousands of dollars and are worn not only by aircraft and defense personnel, but also by wealthy civilians who appreciate the ticking of watches.
Bill Ackman is one such individual. He loved Bremont so much he only took a multi-million pound stake in the business last week. By any measure, Ackman is a rich man. With a personal fortune of over $3bn (£2.4bn), the 56-year-old American investor doesn’t need to work. But he does, running HOLDINGS PERSHING SQUAREa UK-listed company that buys shares of large publicly traded US and Canadian companies and holds them, usually for several years.
Many of these companies are household names, such as Universal Music, Hilton Hotels and the Chipotle restaurant chain, and investments are limited to between nine and 12 at any one time. This means there is plenty of time to research new ideas thoroughly and monitor investments closely after buying the stock.
Ackman started its activity in 2004 as a private fund for professional investors. In 2017, however, Pershing Square Holdings listed in London, offering UK investors the chance to benefit from Ackman’s magic touch.
Today the shares are £28.95. They have risen since listing, but the value of the group’s investments have risen further, with the company’s latest update showing its assets valued at £44.12 per share. In other words, there is a 34% discount between Pershing Square’s shares and the investments it owns.
In almost every way, that discount suggests the stock is cheap, which isn’t helped because federal law means Ackman and his team can’t tell U.S. investors about Pershing Square, even though his investments are all North Americans.
At the time, Pershing was known for taking important positions in failing companies and aggressively pushing for change. The strategy won great success, but it earned Ackman a reputation as a cage-breaker.
Recently, however, Pershing’s approach has shifted from pugilistic to paternal. Companies today are as likely to welcome Ackman to their stock register as they are concerned about its impact on their business. He still takes an active investing stance, but the strategy is more collaborative than confrontational, with board trustees indicating that Pershing’s presence could do wonders for their share price.
Holdings today include Restaurant Brands, owner of Burger King, DIY chain Lowe’s and Howard Hughes Corporation, which develops mini-cities, each home to an average of 150,000 people, with shops, restaurants, bars, cinemas, schools and churches.
Some companies have been in Pershing’s portfolio for years, others for much less. In each case though, Ackman and his team sit down each week and debate whether the stocks still have potential or if it’s time to sell.
Sometimes they’re ruthless, buying Netflix stock in January 2022 and selling just three months later. In most cases, however, the group sticks to its investments, believing that they are resilient enough to survive and thrive even if the US economy stumbles.
Take a stake: Bill Ackman backed Giles, left, and Nick English’s watch company
Ackman has another trick up his sleeve, using sophisticated financial instruments to bolster returns when times get tough. In February 2020, for example, Pershing spent $27 million on credit default swaps – essentially betting that the world was about to get seriously worried about risky investments. The group resells them a few weeks later for more than 2.5 billion dollars.
In 2021, when many economists were looking elsewhere, Ackman warned that inflation was about to rebound. To hedge against this, Pershing invested in “swaptions,” a way of betting that US Treasury yields were about to rise. The strategy has worked well so far and continues to generate returns.
Pershing also pays a quarterly dividend – with 47.5 cents (38p) paid in 2022, declared in dollars but paid to UK investors in pounds and pence. An annual meeting on February 9 should give a taste of the 2023 dividend, expected at nearly 50 cents.
Midas verdict: Pershing Square Holdings is a FTSE 100 company, valued on the stock market at over £7 billion. However, it remains relatively unknown and the share price has suffered. This should change. Ackman has proven his acumen for many years, he has spent over £400million of his own money on Pershing shares and may well have some ideas on how to boost the stock price. At £28.95, the shares are a buy.
Traded on: main market Teleprinter: PSH Contact: pershingsquareholdings.com or Camarco on 020 7357 4989
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