Investing

Bill Ackman Investment Advice – Top 10 Actionable Tips

Bill Ackman is the founder of Pershing Square Capital Management and one of the best-known hedge fund managers in the US. Under Ackman’s direction, Pershing Square has grown to over $13 billion in assets; Ackman himself is worth nearly $3 billion.

In this article, we’ll take a closer look at Bill Ackman’s investment career and the 10 pieces of Bill Ackman investment advice that all investors should know. So, let’s get started!

Bill Ackman Investment History

Bill Ackman began his Wall Street career in 1992, when he co-founded the hedge fund Gotham Partners. Just over 10 years later, in 2003, he founded Pershing Square – the hedge fund he still leads today.

Bill Ackman co-founded the hedge fund Gotham Partners

Throughout his career, Ackman has been known as an activist investor. He typically takes large positions in companies and then pushes the management team to make changes that he believes will benefit shareholders. In one instance, Ackman successfully pushed Wendy’s to spin off its fast-growing Tim Horton’s brand and then sold his shares for a massive profit.

Ackman’s aggressive tactics have led to big losses in some cases though. Famously, Ackman shorted Herbalife because he believed that the company was an illegal pyramid scheme. Ackman ultimately lost nearly $1 billion after a years-long campaign against the company.

Bill Ackman Investment Advice

Bill Ackman’s investing style is aggressive and to some extent requires being able to buy up significant portions of companies’ shares. However, Ackman is also a value investor in many ways. His investments largely focus on companies that he believes are undervalued or are underperforming. 

With that in mind, let’s look at 10 pieces of investment advice that Bill Ackman has shared over his career.

Bill Ackman Investment Advisor

1. Read up on Investing

The first thing that Ackman tells new investors is that they need to learn about the market. “Read everything Warren Buffett has ever written and watch every YouTube video he’s ever appeared in,” says Ackman. “That’s a great way to learn about investing.”

Ackman points out that, unlike most businesses, investing is a business you can learn all on your own through books, videos, and practice. That makes it uniquely suited for individuals who are willing to put in the work it takes to get off the ground.

2. Look for Companies That You Can Own Forever

One of the simplest rules that Ackman lays out for new investors is to buy companies that they can own for decades. “You…really want to invest in businesses that you can own forever. You don’t want to constantly have to be shifting from one business to the next,” according to Ackman.

That means thinking not just about where a business might be in the next year or two, but where it will be in 10 or 20 years. So, you need to think about things like long-term business trends and where the management team is headed rather than short-term price movements.

3. Stick to Businesses You Understand

While some of Bill Ackman’s investments have been based on complicated investment theses, he stresses the importance of investing in businesses that you understand. “There are lots of businesses in which you don’t understand how they make money,” he says. “Even if they’ve had a great track record, I would avoid them.”

If you don’t understand how a business makes money, it’s nearly impossible to value it correctly. Rather than risk getting it wrong, look for a company that makes more sense to you.

4. Be Confident, But Not Arrogant

Ackman tells investors that there’s a fine line between confidence and arrogance: “There’s a difference between arrogance and confidence. If you’re arrogant in investing, you’re going to get killed. If you’re not confident, you’ll never make an investment.”

The key to successful investing, according to Ackman, is to strike the right balance. You should be confident enough in your investments to stick with them even when others think you’re wrong. However, you should also be willing to listen to contrary points of view and adjust course based on new data.

5. Go Against the Crowd

Ackman has spent his career making investments that are unpopular or that go against traditional wisdom. He encourages other investors to be similarly willing to break away from the herd. “When the stock market is going down every day your natural tendency is to want to sell. When the stock market is going up every day your natural tendency is to want to buy. But in bubbles you probably should be a seller. In busts you should probably be a buyer.”

Developing the ability to do your own thinking and not follow the crowd requires discipline and patience. Ackman also points out that in some cases, it can be many years before your investment thesis is proven right.

A man do a reasearching

6. Don’t Let Failures Discourage You

Bill Ackman has had his fair share of failures. In 2018, he took a $1 billion loss when he closed out his short position against Herbalife.

The key, says Ackman, is to learn from your failures and then move on from them. “In order to be successful, you have to make sure that being rejected doesn’t bother you at all.” 

7. Keep Emotion Out of Investing

Like many successful investors, Ackman points out that it’s critical to keep emotion out of investing. “I’m not emotional about investments,” he says. “Investing is something where you have to be purely rational and not let emotion affect your decision making – just the facts.”

Of course, remaining steadfast in the face of investment decisions can be difficult. It’s important to practice good discipline and to write down your investment thesis so you have a clearly defined plan to refer back to. 

8. Ignore the Short-Term

Ackman’s focus on value investing means that he is thinking about the long term – and he encourages investors to do the same. “Short-term market and economic prognostication [are] largely a fool’s errand,” he says. “We should invest according to a strategy that makes the need to rely on short-term market or economic assessments largely irrelevant.”

In practice, that means thinking about a company’s fundamentals, business structures, and growth opportunities while ignoring things like technical analysis and short-term market trends.

9. Small Returns Add Up

While Ackman’s most famous investments are those that returned huge gains, he’s quick to point out that small returns are what most investors should be after. “You don’t need to make a hundred percent a year to have a fortune,” he says. “You just need to invest at an attractive return of 10-15 percent over a long period of time and your money will grow very significantly.”

For investors, that means you don’t need to take huge risks in order to succeed in the market. Focusing in low-risk, moderate-reward opportunities can pay off handsomely over the long run.

10. Don’t Be Afraid to Speak Up

Another thing Ackman tells investors is that there are few things more important than open communication. “A lot of people in the interest of politeness or fear of confrontation or it’s just uncomfortable do not speak the truth.” But if you do speak up, says Ackman, “you’ll have much better relationships.”

Having an open line of communication is particularly important with those you consult when making investment decisions. You should be able to speak your mind about an investment idea of theirs and they feel comfortable challenging your ideas before you dive into an investment.

Bill Ackman Investment Advice-Don’t Be Afraid to Speak Up

Conclusion: Bill Ackman Investment Advice

Bill Ackman has run one of the country’s most successful hedge funds by using a combination of activist and value investing. While Ackman’s style isn’t easily replicable by everyday investors, his advice resonates with any investor interested in finding value in the market and investing for the long term.

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Kevin

Kevin is an ambitious entrepreneur that is obsessed with all things related to finance. From a young age, Kevin has always been involved with side hustles ranging from online selling to freelance work. Over the years, Kevin graduated from side hustles and started launching multiple online and offline businesses. Kevin is a serial entrepreneur who loves starting new businesses and exploring all things related to business and finance. He is constantly looking for new ways to save money, invest money, and create income streams.