Interactive Investor

Bill Ackman unveils new position in Google parent Alphabet

18th May 2023 10:43

by Sam Benstead from interactive investor

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The Pershing Square Holdings manager is known for buying established companies with plenty of growth still ahead of them.

Bill Ackman 600

Pershing Square Holdings manager Bill Ackman has been buying shares in US tech giant Alphabet, as the Google-owner's shares jump on the back of hype surrounding artificial intelligence.

Regulatory filings show Ackman owns, via his fund group Pershing Square Capital Management, more than 10 million shares, worth $1.1 billion (£900 million).

This suggests his stake in his London-listed listed investment trust could be worth about 7% of the portfolio, based on total assets managed by the firm of just north of $15 billion.

Pershing Square Holding shares have fallen 6% this year, but have nearly tripled in value over five years. Nevertheless, the investment trust trades at a chunky 36% discount to net asset value (NAV).

Ackman’s other large bets, according to the 2022 Annual Report, include Restaurant Brand Group, Canadian Pacific Railway, Universal Music Group, and Hilton Worldwide Holdings. He runs a concentrated portfolio of established firms, with strong brands and good growth prospects ahead of them.

He also uses derivates to “hedge” his portfolio, such as by making bets that interest rates will rise or fall. His “interest rate swaptions” position that rates would rise last year was the most successful trade made last year.

Alphabet shares are up 35% this year, as investors bet that interest rates are close to peaking and that artificial intelligence – where Alphabet is a leading player – will boost profits in the future.

Technology generally is having a strong year, with the Nasdaq index up around 25%, but still around 20% lower than its end of 2022 peak.

Ackman has made technology investments in the past – but they haven’t all worked out. He bought and then quickly sold Netflix early last year, banking a $400 million loss after the entertainment giant revealed its first loss of subscribers in a decade.

He told interactive investor in a video interview that one of the reasons was that Netflix was going to have to move into advertising to make more profit, which was an area the management team did not have experience in, and therefore he could not accurately forecast cash flows.

He said: “We lost the ability to build a model with Netflix because the dispersion of potential outcomes, if ad-supported streaming is successful, or it's not, or what if the growth rate is slower than we expected, or it's not, you know, the risk profile changed, and the predictability had changed, so we sold.

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