- Bill Ackman has adopted a long-term buy-and-hold approach in recent years.
- It’s worked as he’s beaten 99% of similar funds since 2018.
- Ackman said two stocks he’s betting on right now include Universal Music and Alphabet.
Bill Ackman has stated that he no longer shorts stocks. At least not with real money.
Over a decade ago, the hedge fund manager famously feuded with investing legend Carl Icahn over Ackman’s short position in Herbalife. Ackman was crushed, forcing him to resign five years ago. Unfortunately for him, the company’s stock has since plummeted.
“By the way, if we’d held our short, we’d be up about 70%.” So I’m still psychologically short on that position,” said Ackman, the founder of Pershing Square Holdings, to CNBC’s Scott Wapner on September 28 at the Delivering Alpha conference in New York. “Being psychologically short is a much lower risk way.”
Today, Ackman follows the lead of another investing legend, Warren Buffett, and selects a small group of stocks to go long on. And it’s working. According to Morningstar data, Pershing Square has outperformed 99% of comparable funds over the last five years.
“If you want to be a successful investor over time and you find a handful of great businesses, doing nothing but owning them is an amazing strategy,” Ackman wrote in a note. “It’s underappreciated, if you will, as a successful way to make money.”
At the conference, Ackman discussed two companies on which he is betting heavily right now: Universal Music (UNGVY) and Alphabet (GOOG). Because Universal Music is traded on the Euronext Amsterdam exchange, it is traded over the counter in the United States, which can be done through a brokerage firm just like any other stock.
Universal Music owns many major record labels, including Capitol Records and Def Jam Recordings, while Alphabet owns Google and YouTube.
Ackman stated that his portfolio includes a 22-25% weight in Universal Music and a 16-17% weight in Alphabet, implying that he is betting 38-42% of his fund on the two companies. The firm reported $16.9 billion in assets under management as of July 31.
“These are businesses we feel very comfortable, we can sleep at night and have a very high confidence level of what they look like over a long period of time,” he went on to say.
He mentioned that both of their business models are based on royalties. Streaming is the way to go for Universal Music.
“If there’s music playing out there, Universal is getting a fraction of a penny for every song, you know, that’s being streamed,” Ackman went on to say.
Alphabet’s platforms are used for digital advertising.
“Isn’t Google a royalty, if you will, on people advertising on the web?” “Or on YouTube,” he suggested.
These companies benefit from inflation as long as they can keep costs low, according to Ackman.
Ackman stated that he purchased Alphabet shares around the new year when the stock was trading for well under $100 due to investor perception that the company was falling behind in artificial intelligence. The stock is up 46% year to date, reaching $131.76 per share.
Ackman stated that he purchased additional shares when the stock was in the $120 range, and that he believes the company’s Bard AI chatbot has caught up to OpenAI’s ChatGPT. He also stated that its access to cloud infrastructure as well as data from its email and search products would help its AI efforts.
“They’ve got many, many competitive advantages, and I think in some ways, you know, in an integrated fashion, it gives them an enormous advantage,” he went on to say. “They will be a dominant player in AI for the very, very long term I — we would expect.”