Lessons from Bill

Dr. Lakmal Rupasinghe
4 min readAug 21, 2023

--

This is Bill Ackman…

Who is he?

Bill Ackman is an American billionaire investor, hedge fund manager, and philanthropist. Some key facts about him:

  • He is the CEO and founder of Pershing Square Capital Management, a hedge fund management firm. Pershing Square has over $10 billion in assets under management.
  • Ackman is known for taking large, concentrated positions in a handful of companies and campaigning for change by engaging with management. Some of his most famous activist investing positions have been in companies like Chipotle, Restaurant Brands International (Burger King), and Herbalife.
  • He has a reputation for being brash and aggressive in his investing style. Ackman has had some major wins but also some controversial losses, such as his failed bet against Herbalife.
  • His net worth is estimated at over $1.5 billion. Ackman has signed The Giving Pledge, promising to give away at least half his wealth to philanthropy.
  • Outside of his hedge fund, Ackman founded Pershing Square Foundation which supports social causes like education, economic development, human rights, and arts/culture.
  • He holds a Bachelor of Arts from Harvard College and an MBA from Harvard Business School. Ackman previously worked in real estate investment before founding his hedge fund in 2004.

In summary, Bill Ackman is a high-profile American investor known for taking activist positions in major companies and his brash/aggressive investing approach. Despite some controversies, he has generated big returns over the years at Pershing Square.

What to Learn From Him?

Here are 10 key investing lessons that can be learned from Bill Ackman’s approach:

  1. Take concentrated bets — Ackman takes large positions in a relatively small number of companies rather than diversifying broadly. This allows him to focus and exert influence.
  2. Do thorough research — He digs into companies extensively before investing, understanding their operations, financials, and industry deeply.
  3. Be activist — Ackman uses his stake and public pressure to push for change at companies, rather than just buying/selling passively.
  4. Think long-term — He has held some investments for many years, not getting shaken out by short-term volatility.
  5. Be confident in your thesis — Ackman sticks firmly to his investment rationale even when facing skepticism.
  6. Accept being contrarian — He is willing to make bets that go against the grain when he sees value.
  7. Use leverage wisely — Ackman uses leverage to magnify returns, but avoids dangerous overleveraging.
  8. Hedge smartly — He buys protection against broad market declines.
  9. Cut your losses — Ackman sells out of positions that aren’t working as expected rather than averaging down endlessly.
  10. Have strong conviction — He displays passion and confidence to back up his investing ideas during media appearances.

Books he wants you to read?

  1. Margin of Safety

Margin of Safety by Seth Klarman focuses on the critical importance of buying assets well below their intrinsic value to allow for a margin of safety against errors or unforeseen risks. Klarman advocates deep fundamental analysis to determine conservative valuations.

2. Security Analysis

Security Analysis by Graham and Dodd is the seminal text on financial statement analysis and valuation techniques. The book goes into great detail on methods for estimating normalized earnings, net asset value, and other valuation metrics. It teaches rigorous research to find stock bargains.

3. Confidence Game

Confidence Game by Christine Richard explores the psychological factors that can lead to bubble markets and financial panics. It details ways investors and regulators are manipulated by corporate frauds. The book emphasizes maintaining rational skepticism rather than blind over-confidence.

4. Beating The Street

Beating The Street by Peter Lynch reveals how diligent bottom-up analysis and research can uncover promising stocks long before Wall Street catches on. Lynch provides frameworks to find growth stocks based on understanding products, company merits, and industry trends.

5. Quality of Earnings

Quality of Earnings by Thornton O’Glove exposes techniques managers use to inflate reported earnings through aggressive accounting assumptions, non-recurring items, and unsustainable financial engineering. It teaches tools to adjust stated earnings to true economic earnings.

6. One Up on Wall Street

One Up on Wall Street by Peter Lynch details an approach of gaining an analytical edge through creative research and contrarian thinking. Lynch describes how he found big winners by understanding companies, customers, and industries more thoroughly than other investors.

7. The Intelligent Investor

The Intelligent Investor by Ben Graham provides foundational wisdom on value investing and controlling emotions. Graham advocates ignoring short-term market fluctuations, maintaining a long-term perspective, and focusing on margin of safety. The book teaches foundational principles for equity analysis.

8. The Warren Buffett Way

The Warren Buffett Way by Robert Hagstrom examines Buffett’s long-term value investing strategy and views on corporate governance. It reveals how Buffett analyzes companies to find durable competitive advantages and honest, capable managers running firms prudently.

9. The Essays of Warren Buffett

The Essays of Warren Buffett are Buffett’s annual shareholder letters, filled with investing wisdom, management principles, and life lessons. Key themes include patience, discipline, rationality, ethics, and humility. The letters showcase Buffett’s thought processes in an approachable way.

10. You Can Be a Stock Market Genius

You Can Be A Stock Market Genius by Joel Greenblatt uncovers special situations like spin-offs, restructurings, recapitalizations, and complex securities that can lead to mispricings. It provides a toolkit of analytical approaches to profit from growth opportunities that most investors overlook.

11. Fooling Some of the People All of the Time

Fooling Some of the People All of the Time by David Einhorn details the author’s decade-long battle to expose fraud at Allied Capital. The book acts as a warning about dishonest corporate managers and short sellers who manipulate financial statements, earnings, and other disclosures to mislead investors.

Sign up to discover human stories that deepen your understanding of the world.

Free

Distraction-free reading. No ads.

Organize your knowledge with lists and highlights.

Tell your story. Find your audience.

Membership

Read member-only stories

Support writers you read most

Earn money for your writing

Listen to audio narrations

Read offline with the Medium app

--

--

Dr. Lakmal Rupasinghe
Dr. Lakmal Rupasinghe

Written by Dr. Lakmal Rupasinghe

Cyber Security Researcher | Digital Nomad | Machine Learning Enthusiast Youtube: https://bit.ly/3a8EAZP Udemy Course: https://bit.ly/2XtbMbB

No responses yet