BOSTON (Reuters) – Multi-billion dollar investor William Ackman, whose portfolio rose nearly 50% this year, said his fund could continue to deliver "high, long-term" returns. He assumes that a newly announced interest in Berkshire Hathaway Inc (BRKa.N) will help increase profits.
FILE PHOTO: William & # 39; Bill & # 39; Ackman, CEO and Portfolio Manager of Pershing Square Capital Management, speaks at the Son Investment Conference in New York, USA, on May 8, 2017. REUTERS / Brendan McDermid / File Photo
Ackman wrote in a letter to customers one day after announcing the purchase of Berkshire shares worth approximately $ 700 million and said the conglomerate was misunderstood.
Berkshire is cheaper than it should be and has underestimated its short-term revenue, but future revenues can rise significantly, Ackman said.
"We believe the Berkshire share price will rise significantly in the coming years," Ackman wrote in the letter.
Berkshire is run by billionaire Warren Buffett. Ackman's 88-year-old role model, often referred to as the world's largest investor, has more than 90 companies, from Geico car insurance to Dairy Queen ice cream.
Ackman, whose $ 8 billion Pershing Square Capital Management is one of the world's most watched activist investment firms, surprised some investors and outsiders alike by betting on Berkshire, which has a market capitalization of $ 500 billion.
53-year-old Ackman highlighted Berkshire's insurance business and said he could invest a significant portion of his insurance assets in publicly traded stocks, while his peers focused primarily on investing in fixed income securities.
"These structural competitive advantages of Berkshire's insurance business are sustainable and likely to continue to grow," Ackman wrote, adding that Buffett should also be known as "the world's largest architect and CEO of insurance companies."
FOCUS ON NEW OPPORTUNITIES
The CEO of United Technologies (UTX.N), Gregory Hayes, who made headlines in June and intended to band together with Raytheon, was criticized. Pershing Square liquidated its holdings in June, and on Thursday Ackman said he had lost confidence in the management and described the deal as a "catalyst for our exit".
He could have tried to oust executives and board members – something he did in companies from Canadian Pacific to Chipotle – Ackman said it made more sense to just go. "It was more productive to sell our stock for a small profit and focus our efforts on finding new opportunities," he wrote.
After Pershing had gained 48.9% this year by August 13, Ackman was confident that his kind of activism could make much more money.
But Ackman said he will not necessarily push for change as publicly as in the past and Berkshire will be a passive investment. Some Ackman investors laughingly said that they do not expect Ackman Buffett to come up with a list of suggestions for improving performance.
An example where a soft-touch has worked so far is Starbucks (SBUX.O), an investment that Ackman had announced at the end of last year and was one of its biggest winners. The Starbucks share price rose more than 50% this year.
Howard Hughes Corp. (HHC.N), the developer of Master Planed Communities, whose board is headed by Ackman, is undergoing a strategic review. Ackman said that no decisions have been made and a variety of options are being considered, "a sale of the company; Sale, joint venture or spin-off of part of the company's assets; a recapitalization of the company; or changes in the corporate structure of the company. "
Reporting by Svea Herbst-Bayliss; Cut by Leslie Adler