Bill Ackman: Why the Market is Labeling Meta & Microsoft as "Old-Fashioned"

Nice to see you.

I think it's a great summit actually. And they're good at asking questions. It's one thing when you have one interviewer. It's another thing when you've got four guys kind of coming at you. So, it's a good challenging dynamic, I think.

I mean, our model is to find the best businesses in the world. Hopefully even briefly at some of the attractive valuations, right entry price, and then to be a long-term investor.

Well, with the help of the New York Stock Exchange, we listed a company called Pershing Square USA, which is a closed-end investment company. And it will be basically a mirror image of our other vehicles that historically have only been offered to either offshore investors, institutional, or super high net worth investors. This is an entity that anyone with $41 can buy one share.

So, our business model really requires long-term money, and the traditional hedge fund model where people commit capital for a couple of years, they can redeem a certain amount each quarter, is fine for a trading strategy, but when you're a long-term investor, you buy big stakes in companies, you join boards of directors, you spend time with management teams helping them with their long-term strategic direction, you don't want money that can leave overnight. The beauty of a public company, which is what a closed-end investment company is, is while investors have daily liquidity, they can buy and sell their shares, the capital is forever basically. And that gives us the ability to make long-term investments in an increasingly short-term world.

And by the way, we also took another company public at the same time. A company called Pershing Square. So, we actually go by the name Pershing Square instead of Pershing Square Capital Management. That's now a subsidiary of our public company. Pershing Square is the management company, the GP as some people call it, or the alternative asset management firm. It's the company I work for, the company I'm CEO of. And it's a very interesting business because you've seen other alternative asset managers like Blackstone, KKR. What's unique about ours is that the capital is permanent. The company itself receives fees based over time on a growing base of assets that grow not by fundraising, although we can certainly launch new funds, but by compounding. If we have a great year, our AUM grows, our fees grow, and the profits of the company grow. So, they're both interesting companies. One is sort of a diversified Pershing Square portfolio of securities. The other is an operating business.

Sure. So, I would say, look, I think I've always thought that the standard for someone making an investment should not be how much capital they have. But if you want to have a standard that's based on a certain level of investment experience, the test today is really generally based on net worth. I think you should be able to take an effective test, pass the test, and become a qualified investor as opposed to having a certain amount of capital.

It's really — I think it's hard to make a statement on the overall market because it's really a bifurcated market. We're finding a lot of really cheap stocks in a market that's hitting new highs, which is sort of an interesting dynamic. A lot of the attention is to semiconductor and memory chips, the IPOs that are coming, and a lot of attention's been taken away from companies that people think are almost old-fashioned. You know, Meta is an old-fashioned company today. Microsoft is an old-fashioned company today. And therefore they're less interesting. But that's not where the excitement is. The result of that is, those stocks are very cheap. Yeah. So we're finding a lot of cheap stocks and, query whether there are some overvalued ones, which of course there are.

Could be. I would say the market's got kind of two components to it. You have the ownership of stocks and you've got this growing index ownership, which is an incredibly important phenomenon. Today, if you're not in the stock index, your valuation is going to be affected. You have two companies — McDonald's, for example, is in the S&P 500. Restaurant Brands, which is Burger King and Tim Hortons and others, is not because it's a Canadian company. It's not in the index. It has relatively limited index ownership. Arguably, it's growing faster, it's a more diversified business. You can make some arguments for why it should trade at a higher multiple than McDonald's, but it trades at a very significant discount. Why? Because it's not in the index. So you have more and more index capital and that's become an increasingly important thing. And in addition to the stocks that are actually in the index, actual ownership of index funds, there are a lot of investors who follow the index. And so a huge amount of capital is in a very stable format, this sort of index ownership. And then there's also a lot of capital invested by so-called pod shops — Millennium and Citadel and others have been taking on increasing amounts of capital. And they have much shorter-term mandates. And they're the marginal buyer and seller of many securities. And the result is really more volatility. Because the way those models work is, you have very tight risk limits. And if you're going to lose more than a certain amount of money, you're out. And what that leads to is even very big companies, the stocks can move dramatically if they miss an earnings expectation or they change their guidance or there's some news event. And you've seen a huge amount of volatility and geopolitics adds to that volatility. And, of course, midterm elections will be part of that volatility. I guess if there's a material surprise, like if the Senate, for example, were to tip to the left, I think that would be a pretty negative thing for markets.

You know, it's interesting. I'm turning 60, which I did — 250 years sounds pretty young as a country to me. It's like a quarter of my lifespan. The country is only four times my age, which I find something I didn't think about when I was 10, for example. The country seemed pretty old back then. Now the American experiment seems very young. So, that's one sort of notable thing. And I think it's important we're around. And what's kind of amazing is a bunch of relatively young guys — and they were generally guys back then — wrote the Constitution and the Bill of Rights and set up a system with free speech and a republican nature of government that's worked, you know, all of our warts notwithstanding, remarkably well over a quarter of a thousand years. It's amazing.

A continued American exceptionalism and less divisiveness. Imagine how great this country would be if more of us were on the same side as opposed to this constant tipping back and forth and a lot of venom from one side of the aisle to the other. It's just — I don't like it when the president of either party gives the State of the Union speech and only half the people get up in the audience. It just seems silly to me.

It depends on leadership. End of the day, it depends on leadership. And look, I think also social media to its detriment and the way algorithms work, I think have contributed to — we need to redesign social media in a way that brings the country together as opposed to pushes apart. I think we need to do more of that.

You know, I always try to speak the truth about stuff I feel like is important. And hopefully on the margin that helps.

Thank you.