I know what you’re thinking: “Bill Ackman doesn’t belong in this book; he isn’t Canadian.” In my mind, though, Bill is almost an honorary Canadian, since he’s been heavily involved in the Canadian market through three large and notable plays: Wendy’s/Tim Hortons, Canadian Pacific Railway, and Valeant. While each of those Canadian investment plays is unique, they all underscore Bill’s multi-faceted activist methodology at Pershing Square Capital Management. The first, Wendy’s/Tim Hortons, was a breakup play. The second, Canadian Pacific Railway, was a turnaround play. The third, Valeant, is a growth or “platform” play.
Bill capitalized on all three of his Canadian investments, which is why in my first email to him, I asked, “Do you have a love affair with Canadian companies?” Honestly, I didn’t expect to hear back from the man who heads Pershing Square Capital Management, with close to $20 billion in assets under management. Bill’s one of the most high-profile hedge fund managers in the world, and it seemed unlikely he would take time to talk to a kid from Toronto rather than U.S. media outlets like CNBC or Bloomberg. Not to mention I had emailed Bill during a period in which his Herbalife short had attracted the attention of the media, the FBI, and the SEC. He must have been busy. But since my mantra is “Don’t fail to try. Try to fail,” I went for it. Just two minutes after I sent Bill my “Canadian love affair” email to ask if he would be willing to be interviewed, he responded: “Sure.”
As I prepared for the interview, I started to think that while Bill’s Canadian investments are excellent market case studies, the way in which he invests and then realizes value in companies is out of reach to most, if not all, common investors. Bill is an activist investor with deep pockets and strong influence. He can and does push the board of directors and management at companies to make changes that will positively affect operations, and as a result, raise stock prices. Take Canadian Pacific Railway, for example. Yvan Allaire, executive chair of the board of directors for IGOPP, the Institute for Governance of Private and Public Organizations, summed up Bill’s CP play quite eloquently in the Financial Post: “In 2011, Pershing Square Capital Management, an activist hedge fund founded by William (Bill) Ackman, acquired some 14.2% of Canadian Pacific Railway’s outstanding shares and proceeded to require several changes in the management and governance of the company. The CP board resisted fiercely his entreaties. A memorable proxy fight ensued, which was won by Pershing and resulted in a new CEO, new board members, and a new strategy for CP. Results of this palace revolution were, in share price terms at least, remarkable — astounding, actually. From September 2011 to December 31, 2014, CP’s stock jumped from less than $49 to north of $220, a compounded annual rate of return of 62% (including dividends).” The average investor won’t be able to accomplish something of that magnitude. So, I asked Bill how an investor with limited resources could replicate the activist approach, to which he replied, “You can ride the coattails of shareholder activists.” Investors can indirectly employ the activist approach, by directly buying the stocks that successful activist investors hold in their portfolios, along the lines of Som Seif’s Best Ideas Fund. In fact, Som includes Bill Ackman’s highest-conviction positions in that fund.
Bill is a busy man, and he occasionally had to pause our telephone interview (Bill’s office is in Manhattan), to address people as they came into his office. However, Bill is a talented enough multitasker that he was able to hold the thread of the conversation while carrying out his business. He was archetypal Bill Ackman: confident, articulate, and to the point — everything I had come to expect about Bill from his television appearances. I highly recommend that you watch the CNBC clip “Billionaire Showdown: Bill Ackman vs. Carl Icahn,” to get a better picture of Bill’s attitude, demeanour, and train of thought.
Activist investor: an investor who takes a stake in a business to make changes at board, management, and operation levels to improve shareholder return.
Board of Directors: a group of directors elected by the shareholders of a company.