The Opportunities Bill Ackman Sees
Where the Sizable Returns Come From
I’ve long been a student of Warren Buffett’s value investing: Margin of Safety -
You want to buy a company at a price that if you’re wrong about what you think it’s worth and it turns out to be worth 30% less, you paid a deep enough discount to your estimate that you’re still okay.
If you’ve read my past essays, you know I’ve written extensively about him (Reading Warren Buffett’s Annual Letters to Berkshire Hathaway Shareholders: 2011–2020, Life Lessons I Learned From Warren Buffett). However, I found it difficult to apply this line of thinking to the current market.
I recently came across Lex Fridman’s interview with Bill Ackman, where I learned that Ackman, being an influential investor himself, is also a follower of Warren Buffett.
In the interview, Ackman mentioned the key criteria he considers before investing in a company:
- Simple: Businesses that are easy to understand.
- Moat: Companies with significant barriers to entry.
- Financially Sound: Companies that don’t need to raise capital constantly.
- Deep Discounted Price: Buying from disappointed shareholders who have lost confidence and are selling at a low price relative to what it’s worth if fixed.
Additionally, once Ackman owns shares of a company, he influences the board to make changes.
