Wednesday, November 6, 2013
Buried in the unflattering Vanity Fair profile of Daniel Loeb is a sad anecdote about the demise of the friendship between the sharp-tongued activist investor and Bill Ackman. Late last year, Ackman, who runs Pershing Square Capital, publicly said that he's shorting $1 billion worth of Herbalife, a multi-level marketing company that sells nutritional supplements.
It's Ackman's belief that Herbalife is a "pyramid scheme" that targets lower income individuals, especially from the Hispanic population. Shortly after Ackman's presentation, Loeb snapped up an 8.2% stake in the company. He also called Ackman's pyramid scheme accusation "preposterous." Loeb also gave Herbalife a stock a price target of $55 to $68 a share in a letter to investors.
He exited the position sometime in the first quarter of this year for a nice profit. Herbalife's stock was trading below Loeb's price target, though. The highest the stock hit during that time frame was $46.19 a share. That didn't seem to sit well with Ackman who confronted Loeb about the trade at Vanity Fair's Oscar party on Feb. 24th.
In February both Loeb and Ackman attended Vanity Fair’s Oscar party in Los Angeles. A person there reported that Ackman went up to Loeb, said hello, then added about Herbalife, “Look, you really shouldn’t have done that,” to which Loeb replied, “Why? Why shouldn’t I have done that?” Ackman said, “It was really wrong.” Loeb replied, “No, why? I made $50 million. What’s wrong with that?” The two men no longer speak.
Ackman told Andrew Ross Sorkin in a New York Times Q&A earlier this month that Loeb neither is nor has been "a close friend of mine."
Tuesday, November 5, 2013
.The second most representative stock in Bill Ackman’s portfolio is the finance firm General Growth Properties Inc (NYSE:GGP). As of June, the investor holds 67.7 million shares, representing 12.30% of his holdings. The stock rose +1.42% during the week, and keeps the same trend, since today is up +0.50%. Ackman paid only an average price of $10.83 per share, resulting in a 84.64% gain. BEAM Inc (NYSE:BEAM), the alcohol beverage company, is one of the stocks with a major allocation in the billionaire’s portfolio.
Monday, November 4, 2013
According to CNBC’s source, Ackman is putting together another big presentation about Herbalife. That presentation is expected to be given in November at the Robin Hood Investment Conference. Right now you’re probably having flashbacks of that VERY lengthy presentation the hedge fund manager gave last year at an Ira Sohn Conference. He announced a $1 billion short position in the company and called it “a pyramid scheme.”
Shares have been rising in spite of all of his efforts to derail the nutritional supplements company. Ackman has lost millions on his short bet, but he restructured it recently in an attempt of avoiding a short squeeze.
Since Ackman publicly denounced Herbalife Ltd. (NYSE:HLF), other hedge fund managers have been getting in on the action, taking one side or another. Carl Icahn went against Ackman, taking a long position. Several other managers sided with one of the two hedge fund titans, forming their own views about whether or not Herbalife is a pyramid scheme.
Ackman said recently he was making progress in his push for an investigation of Herbalife as a pyramid scheme. His presentation is said to be focused on new information his firm uncovered after conversations with a number of Herbalife’s former employees.
Ackman has been attacking Herbalife in a variety of ways. In addition to alleging that it’s a pyramid scheme, he also called the company’s accounting practices into question. In August, he wrote to the company’s new auditor PricewaterhouseCoopers and explained what he viewed as some major accounting problems. However, Herbalife said it “stands by” its financial statements, which the company was forced to have re-audited because of allegations surrounding its previous auditor.
Meanwhile Herbalife Ltd. (NYSE:HLF) keeps foiling Ackman’s attempts to take it down, posting strong earnings and appointing a few high profile board members. Ackman’s new presentation on the company clearly suggests he thinks there is yet more room to complain.
Ackman isn’t the only one worried about Herbalife’s business model. A number of lawmakers and activists have also come out against Herbalife, urging regulators to investigate it as a possible pyramid scheme.
Sunday, November 3, 2013
Look, investing is inherently probabilistic — not every investment is going to be profitable. We bought a big stake in the company at a price that we believed to be attractive. We worked with the board to help recruit who we believed to be the best retail C.E.O. in America, Ron Johnson, who opened the Apple stores. The execution wasn’t perfect, far from it. Turnarounds are tough.
Your stake in Target also failed. Will you ever invest in another retailer?
It would have to be a very special situation.
Your short position on Herbalife — you’re betting against the company — has caused some friends like George Soros and Daniel Loeb to turn on you.
Neither of the people you mentioned is, or has ever been, a close friend of mine. I certainly know the people you mentioned — but, look, you need a thick skin to be in this business. In a short sale, the whole world is going to be on the other side of the investment until they realize you’re right.
You’ve said that Herbalife is a pyramid scheme and its stock will go to zero.
It is a certainty that Herbalife is a pyramid scheme. We believe it’s harming a population of low-income, principally Hispanic people in the U.S. to benefit a handful of superwealthy people at the top of the pyramid. You should ask yourself: Why are more than 60 percent of Herbalife’s distributors in the U.S. low-income members of the Hispanic community? Why are they buying overpriced nutrition products? There’s something unusual about this business. This makes no sense.
Getting seats on corporate boards is important to your investment strategy. Yet you wrote a public letter criticizing J. C. Penney’s chairman while you were still on the board.
The bottom line is, my obligation is to the shareholders. Think about the political process — it’s hard to think of an example of any kind of office where there aren’t multiple candidates from multiple parties competing for the office. Ninety-nine percent of the time, in the shareholder election process, there’s no choice for shareholders as to who serves on the board. I think that it’s a very broken process.
What does an investment manager know about running a company?
Jeff Bezos was a hedge-fund manager who became C.E.O. of Amazon. Prior to that I don’t know that he had any “business experience.”
What do you think of the hedge-fund industry’s reputation?
I think the hedge-fund industry has taken a reputational turn for the worse, this dog-eat-dog stuff. I’m not just talking about Herbalife or J. C. Penney, but in other situations where the media really focuses on who’s long and who’s short. I don’t think it’s a good thing for the industry.
What exactly is your investment style?
I would say we are, generally, elephant hunters. We’re not buying something at 100 because we think it’s worth 120 and then trading out of it. We’re looking for very large profits. We’re looking for very undervalued situations. Generally most of our investments are very-high-quality businesses. We’re looking to double our money over a several-year period of time.
According to Forbes, you’re worth more than a billion dollars already. What are you going to do with all your wealth?
I’m going to give away the substantial majority of everything I’m able to create over my lifetime.
Why are you still working?
I love what I do. I don’t do it for the money. I work on behalf of investors that I like and want to do well for. I’m a competitive person. In order to catch up to Buffett, I’ve got 35 years to go.