When it comes to fending off an uncertain and formidable world, William “Bill” Ackman reaches for Jim Beam and Oreos — his comfort investments.
“There are certain businesses that over a long period will do well almost regardless of what’s going on in the world,” says the founder and chief executive of Pershing Square Capital Management in New York.
People imbibe in good times and bad. And when it comes to Oreos, off-brands simply won’t do.
Hence Ackman’s investments in Beam Inc., which owns Jim Beam, Courvoisier and Maker’s Mark; and Kraft Foods, Inc., parent of Oreo, Nabisco and Cadbury.
Many Dallas business readers know Ackman’s name because he owns a major chunk of J.C. Penney of Plano, and his hedge fund also owns a large interest in real estate holding company Howard Hughes Corp. of Dallas.
“Fundamentally, I’m an optimist. I believe in America, and I largely invest here,” says Ackman, who will speak in Dallas next Tuesday at the fifth annual GIBI Investors Symposium. “There are some businesses that will make a fortune if the economy’s strong, but they will go broke if the economy’s weak. We look for the very stable, predictable business that can survive the volatility in the world.”
That view now includes North American trains in the form of Canadian Pacific Railway Ltd.
Pershing is its largest shareholder after paying $1 billion for a 12.2 percent stake that was quietly amassed between Sept. 23 and Friday, when Pershing’s SEC disclosure statement became public.
Canadian Pacific Railway’s stock has underperformed that of rivals Canadian National Railway Ltd. and Norfolk Southern Corp., with many fingers pointing to the top brass as the reason.
What prompted his purchase?
“I had a train set when I was a kid,” Ackman deadpans.
Really? “Yeah.” But then he adds, “We’re not ready to talk publicly about it yet.”
He’s waiting until he meets with the railway’s management, who reportedly huddled in an emergency session over the weekend to discuss his move.
The market initially reacted well, with the buy spurring speculation about a takeover, possibly by Warren Buffett, who bought BNSF Railway Co. of Fort Worth in 2009. But then traders backed off, with the stock closing Tuesday below last week’s finish.
Inside out
Ackman, 45, is considered a dashing agitator of Wall Street, taking on companies that he believes aren’t making the best use of their resources. He uses his clout to reshape them from the inside rather than hold them hostage from the outside.
That’s what has happened at Penney, where Ackman sits on the board, thanks to Pershing’s 18.3 percent stake. So far he’s pretty pleased with the estimated $903 million he’s sunk into the giant retailer. On paper, Ackman has made about $300 million on his year-old investment.
“J.C. Penney, compared to other things we own, has more economic sensitivity, but it’s a company with enormous potential. I’m very excited about our new CEO,” Ackman says, referring to former Apple Inc. head of stores Ron Johnson, who took over Tuesday.
“[Former Penney CEO] Mike Ullman did a number of things that will help the company long term. Opening Sephora inside J.C. Penney was brilliant. It’s modernizing the store and attracting a younger customer. That’s the start. You’re going to see Ron continue that.”
Ackman is also chairman of Howard Hughes, a multibillion-dollar real estate holding company formed in Dallas in November after being spun out of shopping mall owner General Growth Properties Inc. as part of its bankruptcy.
Howard Hughes, which is publicly held but so far nearly as stealthy as the eccentric tycoon it was named for, owns 34 properties, including two master-planned developments outside Houston. It owns the South Street Seaport in Manhattan, Riverwalk Marketplace in New Orleans, 60 acres of retail space in Honolulu and an office development in downtown Chicago.
“That company is going to create more jobs than most companies its size because it’s going to develop a lot of real estate over the next five, 10 years,” says Ackman, who sat on General Growth’s board during the bankruptcy and orchestrated the spinoff.
He made out like a bandit in the process.
“It’s true,” Ackman chuckles. Pershing’s holdings “went from 34 cents [a share] to $25 [a share] if you include the spinoff of Howard Hughes.
“But here’s the thing about our strategy,” he adds, “whereas private equity buys the whole company and the shareholders on that day get a pop, they don’t get to participate going forward. With us, the shareholders get to go along for the ride.”
GIBI
Ackman will talk more about his philosophy Tuesday at the GIBI Investors Symposium at the Winspear Opera House.
He and nine other celebrity investors will give 15-minute speeches, and they’re supposed to give one idea for a quick return.
This year’s lineup includes T. Boone Pickens, who’s supported GIBI since its inception in 2007.
Price of admission is $1,000, but all proceeds go to the Michael J. Fox Foundation for Parkinson’s Research and the Vickery Meadow Youth Development Fund, favored charities of Dallas businessmen Shad Rowe and John Neill, who underwrite $200,000 in expenses. The speakers donate their time.
The first four GIBI events each raised more than $1 million for Parkinson’s research and to help underprivileged kids in one of Dallas’ most impoverished neighborhoods.
“Like all investors, John and I are searching for clarity and direction in a very confusing and turbulent world,” says Rowe, who is battling Parkinson’s. “We’ve invited 10 of the most thoughtful and interesting speakers we could imagine to come to Dallas to share their insights.
“Will we learn something revolutionary that changes our lives? Maybe, maybe not. But they think about the world in ways that other people don’t.”
As for Ackman’s “best idea,” he says: “There’s no fun in hinting. But I’ll have an idea that will more than cover the cost of admission.”
AT A GLANCE
William “Bill” Ackman
Age: 45
Born: New York
Title: Founder and chief executive, Pershing Square Capital Management in New York
Education: Graduated magna cum laude, Harvard College, 1988; MBA, Harvard Business School, 1992
Personal: Married to landscape architect Karen Ann Herskovitz
GIBI
What: Investment symposium
When: 2-6 p.m. Tuesday
Where: Winspear Opera House
Cost: $1,000
Benefiting: Michael J. Fox Foundation for Parkinson’s Research and the Vickery Meadow Youth Development Fund
SPEAKERS
Bill Ackman, chief executive, Pershing Square Capital Management LP
Bruce Berkowitz, founder, Fairholme Capital Management
David Einhorn, president, Greenlight Capital Inc.
Mario Gabelli, chief executive, Gamco Investors Inc.
Lisa Hess, president, SkyTop Capital Management LLC
John Kleinheinz, president, Kleinheinz Capital Partners Inc.
R. Brad Martin, chairman, RBM Venture Co.
Ray Nixon, large-cap portfolio manager, Barrow, Hanley, Mewhinney & Strauss LLC
T. Boone Pickens, chairman, BP Capital Management LP
Michael Price, president, Price Family Foundation Inc.
