Bill Ackman on the worst position in his portfolio and why he is still holding it

Summary

Bill Ackman said markets appear to be shifting toward greater prudence: investors are paying more attention to cash flow, business quality, and long-term prospects, and less to short-term momentum. He said some “neo-cloud” and AI-related trades had fallen by roughly half, while some high-quality businesses he had wanted to own for years had become more attractively priced. Pershing Square made about seven new investments over the prior six months, which Ackman described as a high number for the firm.

Ackman said he would not predict whether the Nasdaq had bottomed, putting his odds of a correct short-term call at 50/50. In his view, the overall market was not expensive: aggregate profit growth was strong, and market valuation multiples were within historical ranges. He sees AI as a transformative technology that could support growth and improve margins, but prefers businesses with durable positions, predictable cash generation, and limited dependence on raising large amounts of capital.

Investment Views and Framework

• Preferred business characteristics: High quality, durable competitive positions, predictable results, and strong cash generation.
• AI investment filter: Distinguish among different AI business models. Ackman prefers those that do not require very large amounts of external capital to execute their plans, since dependence on capital markets increases risk.
• Valuation caution: Businesses that require heavy investment and rely on uncertain revenue growth have a wider range of possible outcomes and are harder to value using conventional cash-flow assumptions.
• Portfolio approach: Ackman characterized Pershing Square as a low-risk investor seeking businesses it can forecast with high confidence.

Companies, Assets, and Portfolio Positions

• Fannie Mae and Freddie Mac: Ackman called these his favorite positions on a risk/reward basis—and the portfolio’s worst performers. Pershing Square has held them for 13 years, betting that they will be released from conservatorship and privatized.
  • He said the shares had risen from roughly $2–$3 after Trump’s election to a peak of about $70 last year, then fallen more than 60% during the current calendar year to around $4.
  • Ackman estimates a value of $40–$50 per share, implying roughly 10× upside, if the companies are released from conservatorship.
  • He estimated the position had cost the portfolio 800–900 basis points of performance.
  • The thesis depends substantially on a presidential decision. Ackman said the companies had rebuilt capital and were ready for release, but the president had not acted. He cited a Treasury Secretary comment from about two weeks before the interview that the issue would be addressed in the second half of the president’s term, but not before the midterms.
  • Ackman framed a possible release as creating about $500 billion in value for the American people, with 20% going to shareholders. He said the market appeared to assign a near-zero probability to the outcome, while he believed the probability was meaningfully higher.
  • Key risk: The investment depends on government action and timing; the projected upside is conditional, not assured.
• Anthropic (private company): Ackman called its growth story remarkable and said members of his team viewed it positively, citing its balance sheet, market position, and potential path to cash generation. However, he said its valuation is difficult to determine because of substantial computing investment, capital needs, and uncertainty over future revenue and its ability to remain a leader. He said it does not fit Pershing Square’s portfolio because the range of outcomes is too wide.
  • He described it as a more speculative investment than Visa, which Pershing Square owns.
  • He said Anthropic may be near or at operating profitability, while emphasizing that computing investment and capital expenditure remain important considerations.
• Microsoft: Ackman remains positive. He emphasized its enterprise distribution, cybersecurity, administrative controls, and ability to manage employees’ use of AI. He argued that AI competitors may find it difficult to displace Microsoft’s position as a gateway to office workflows and enterprise customers. He cited a figure of about 450 million business locations when discussing Microsoft’s reach; the subtitle wording may be imprecise.
• Netflix: Ackman said the stock had fallen about 50% since Pershing Square’s purchase and roughly 60% from its peak. He noted weaker engagement, with viewers spending less time on average, but said subscription growth and renewals remained strong. He said the shares had moved from roughly 30–35× earnings to about 16–17× earnings and described the stock as cheap. Potential supports he mentioned included continued earnings, cash-flow, and revenue growth; new content; and clearer disclosure about how subscriber numbers translate into business performance.
• Nvidia: Ackman praised CEO Jensen Huang’s leadership and said he would reserve judgment until the facts around reported issues were known. He said Huang should be transparent and agreed he should testify before Congress. Ackman also discussed succession risk at founder-led companies, while saying he believed Nvidia could remain a strong company with or without Huang.
• Other companies and references: Amazon, Google, Meta, and SpaceX were mentioned in discussions of enterprise AI distribution, software competition, and founder-led companies.

Macro and Market Context

• Ackman said AI could support long-term economic growth and improve the margins of strong businesses, but cautioned against highly leveraged or capital-hungry ways of investing in it.
• He said that if capital markets cannot provide companies with the funding they seek, their business plans may be affected.
• On Federal Reserve leadership, he described Kevin Warsh as intelligent and capable and said markets may want more transparency. He did not give a specific rate-policy forecast.
• Ackman declined to forecast short-term market direction, saying he had an equal chance of being right or wrong.

Assets and Instruments Mentioned

• Stocks and companies: Fannie Mae, Freddie Mac, Microsoft, Netflix, Nvidia, Visa, Anthropic (private), Amazon, Google, Meta, and SpaceX.
• Markets and indexes: S&P 500 and Nasdaq.
• Sectors and themes: AI, neo-cloud companies, cloud computing, enterprise software, and AI “picks and shovels.”
• Tickers: No ticker symbols were spoken in the subtitles.

Disclosures and Cautions

Ackman discussed several positions as holdings, including Fannie Mae, Freddie Mac, Microsoft, Netflix, and Visa. He gave no explicit “not financial advice” disclaimer. He cautioned that he was not making short-term market predictions and repeatedly described the Fannie Mae/Freddie Mac thesis and Anthropic’s valuation as uncertain or dependent on difficult-to-predict outcomes.

Presenters/source: Bill Ackman, Pershing Square Capital Management; Brian Sozzi, Yahoo Finance.