Super-investor Bill Ackman’s roadmap to $15 billion

Bill Ackman, the founder of Pershing Square Capital Management, has amassed substantial wealth by adhering to rigorous principles when determining where to allocate his and his clients’ funds.

Pershing Square Capital manages approximately $15 billion in assets, with $12 billion allocated to a publicly traded hedge fund. 

Ackman’s hedge fund has consistently outperformed the S&P 500 over the past two decades, elevating him to a prominent position on Wall Street.

Bill Ackman’s Pershing Square’s biggest holdings in Q3 2023 were Chipotle Mexican Grill, Restaurant Brands International, and Hilton Worldwide.

Other companies in its portfolio include Lowes Companies, The Howard Hughes Corporation and Apple.

He is well-known for investing in very few companies, and his current portfolio of only eight companies clearly illustrates this strategy.

Ackman is highly selective in picking investments and said he follows eight principles that determine whether an investment is worthwhile.

• The business must be simple and predictable.
• The company must be free cash flow generative.
• It must have a dominant market position.
• There must be big barriers to entry for competitors.
• There must be a high return on capital.
• The company must have limited exposure to extrinsic risks they can’t control.
• The business must have a strong balance sheet and not need access to outside capital to survive.
• The company must have an excellent management team and good governance.

“When we have veered from these eight principles, we have lost money,” Ackman said. 

“In each case where we compromised on business quality or complexity, we have been harmed.”

He strongly focuses on business quality with predictable cash flows, which he described as paramount to determining how much a company is worth.