Key Takeaways
- • Bill Ackman, founder and CEO of Pershing Square USA, Ltd. (PSUS), says a great stock should be one an investor can buy and hold through a 20-year market closure with "an enormous degree of certainty" of owning "something that's enormously valuable" afterward.
- • Ackman made the remarks in a podcast interview with Nicolai Tangen, CEO of Norges Bank Investment Management, published on a Wednesday.
- • Ackman recommends identifying the strongest short seller against a holding and testing whether that bear case can be methodically rebutted before maintaining conviction.
- • Pershing Square's checklist prioritizes durable competitive advantages and predictable long-term cash flows, and avoids businesses exposed to commodity prices, interest rates or regulation that it cannot confidently value over 10 to 20 years.
- • Ackman says Netflix, which he exited in 2022 after losing more than $400 million, is now a "high-growth utility" he expects to return "well into the 20s" annualized.
Summary
Bill Ackman, founder and CEO of Pershing Square USA, Ltd. (PSUS), argued that investors should focus on businesses capable of creating significant value over decades, even if markets temporarily shut. Speaking on a podcast with Nicolai Tangen, CEO of Norges Bank Investment Management, Ackman said a great company is one investors could buy today and hold for two decades with "an enormous degree of certainty" that they would own "something that's enormously valuable" at the end of that period, according to the interview as reported by Benzinga and TradingView.
Ackman said his preferred businesses are not confined to a single industry. He compared them to royalty-collecting companies or annuities that can grow rapidly for extended periods without requiring substantial reinvestment. He estimated that 200 to 300 businesses may qualify as truly great, but far fewer are available "at a price that makes it a great investment."
On due diligence, Ackman recommended finding the strongest short seller covering a company an investor owns and carefully examining that case. "Find the person who makes the best case for why you're wrong," he said. Investors should then determine whether those arguments change their view or can be rebutted point by point. "If you can rebut each of their arguments, then you can feel more confident in your investment," he said.
Pershing Square holds concentrated positions in companies including Amazon.com Inc. (AMZN), Microsoft Corp. (MSFT), Meta Platforms Inc. (META), Brookfield Corp. (BN), Uber Technologies Inc. (UBER), Visa Inc. (V) and Mastercard Inc. (MA). Ackman said the firm uses a checklist to identify companies with durable competitive advantages and predictable long-term cash flows. He avoids businesses he cannot confidently value over 10 to 20 years, prioritizes durability over short-term earnings, and steers clear of companies highly exposed to factors outside their control, such as commodity prices, interest rates or regulation. He criticized the investment industry's short-term focus, contrasting it with the long-term approach associated with Warren Buffett.
Ackman also addressed Netflix Inc. (NFLX). He lost more than $400 million on the stock in 2022 before exiting over concerns about its outlook, and has since returned to it, forecasting annualized returns "well into the 20s" and describing the company as a "high-growth utility" citing subscriber loyalty, pricing power and sustained earnings growth. He viewed Netflix's latest quarter favorably despite a post-earnings selloff, noting third-quarter operating income rose 37% to $4.46 billion while cancellations declined despite price increases.
Ackman said his preferred businesses are not confined to a single industry. He compared them to royalty-collecting companies or annuities that can grow rapidly for extended periods without requiring substantial reinvestment. He estimated that 200 to 300 businesses may qualify as truly great, but far fewer are available "at a price that makes it a great investment."
On due diligence, Ackman recommended finding the strongest short seller covering a company an investor owns and carefully examining that case. "Find the person who makes the best case for why you're wrong," he said. Investors should then determine whether those arguments change their view or can be rebutted point by point. "If you can rebut each of their arguments, then you can feel more confident in your investment," he said.
Pershing Square holds concentrated positions in companies including Amazon.com Inc. (AMZN), Microsoft Corp. (MSFT), Meta Platforms Inc. (META), Brookfield Corp. (BN), Uber Technologies Inc. (UBER), Visa Inc. (V) and Mastercard Inc. (MA). Ackman said the firm uses a checklist to identify companies with durable competitive advantages and predictable long-term cash flows. He avoids businesses he cannot confidently value over 10 to 20 years, prioritizes durability over short-term earnings, and steers clear of companies highly exposed to factors outside their control, such as commodity prices, interest rates or regulation. He criticized the investment industry's short-term focus, contrasting it with the long-term approach associated with Warren Buffett.
Ackman also addressed Netflix Inc. (NFLX). He lost more than $400 million on the stock in 2022 before exiting over concerns about its outlook, and has since returned to it, forecasting annualized returns "well into the 20s" and describing the company as a "high-growth utility" citing subscriber loyalty, pricing power and sustained earnings growth. He viewed Netflix's latest quarter favorably despite a post-earnings selloff, noting third-quarter operating income rose 37% to $4.46 billion while cancellations declined despite price increases.
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