Bill Ackman commands far too big a premium

Visa

14/08/2026 13:00

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
By Stephen Gandel
NEW YORK, August 13 (Reuters Breakingviews) - Talk is cheap, but not for Bill Ackman. The billionaire investor's Pershing Square fund manager PSUS.N delivered an uninspiring set of quarterly results, its first since an underwhelming initial public offering in April. It's hard to justify the premium valuation it commands. 
Pershing Square reported on Thursday that distributable earnings, the firm's preferred measure, increased 10% from the same three-month stretch a year earlier and just 1% over the previous 12 months. Setting aside accounting quirks, its nearly $16 billion market capitalization equates to about 50 times that profit, implying a far faster growth rate. Its flagship closed-end fund, however, trades below the value of its assets.
The premium market cap is based largely on faith in Ackman's stock-picking skills. It is not obvious, though, how his newly acquired stakes in video-streaming service Netflix NFLX.O and payments giant Visa V.N, both of which are widely owned and also command rich valuations, will turbocharge Pershing Square.
Ackman's sales pitch is his track record, which is undeniably strong. Since 2004, Pershing Square's main fund generated a self-declared 15.6% annualized return, net of fees, outperforming the S&P 500 Index by nearly 5 percentage points. Much of that performance derived from pushy boardroom campaigns, a strategy Ackman has largely abandoned, or well-timed macroeconomic investments like ones against a pandemic market collapse.
Lately, the portfolio has been less distinctive. Its largest positions include tech goliaths Amazon.com AMZN.O and Microsoft MSFT.O, whose share prices have swung around as investors grapple with the massive capital expenditure on artificial intelligence. They are also commonly held in index-linked portfolios and Pershing Square says it has not put on any meaningful hedging trades.
During a call with analysts, Ackman argued that his portfolio is attractive because it trades at a discount to the broader market. The stocks in it, however, command a weighted average of about 19 times trailing earnings, compared with roughly 20 times for the S&P 500 Index. His performance doesn't help the uncompelling case either: Pershing Square's fund is down more than 4% this year against a 14% gain for the benchmark.
Stronger returns would, naturally, lift assets and earnings. A new fund or chunky acquisition could help even more. There is little to suggest either one is imminent, however. Instead, Ackman simply stands behind his investing prowess. So far, there's nowhere near enough money where his mouth his.
     
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CONTEXT NEWS
Bill Ackman's Pershing Square on August 13 reported a 10% increase in quarterly earnings, to $54 million, from a year earlier, after adjustments for one-time expenses and stock-based compensation. They are the first financial results since the fund's April 26 initial public offering.

(Editing by Jeffrey Goldfarb; Production by Pranav Kiran and Maya Nandhini)
((For previous columns by the author, Reuters customers can click on GANDEL/ stephen.gandel@thomsonreuters.com))