======Pershing Square Capital Management======
Pershing Square Capital Management is a prominent American [[hedge fund]] management company founded by the outspoken and influential investor, [[Bill Ackman]]. While it operates as a hedge fund, its core strategy is a highly concentrated and public form of [[activist investing]]. In essence, Pershing Square doesn't just buy stocks; it buys large, influential stakes in a small number of publicly traded companies it believes are significantly undervalued. After investing, Ackman and his team actively work to influence the company's management and board of directors to make specific changes—such as selling a division, changing leadership, or improving operations—that they believe will unlock the company's true value for shareholders. This approach is a muscular, hands-on version of [[value investing]], where the investor doesn't just wait for the market to recognize a company's worth but actively creates the catalyst for that recognition. Pershing Square's high-profile campaigns are often the subject of major financial news, making it one of the most-watched investment firms in the world.
===== The Ackman Approach: Activist Value Investing =====
At the heart of Pershing Square is a belief that good companies are sometimes poorly managed or strategically lost. The firm’s job is to identify these situations and force a change for the better.
==== What is Activist Investing? ====
Think of an activist investor as a shareholder who refuses to sit quietly in the stands. Instead, they buy enough tickets (shares) to get a megaphone and a seat on the coaching staff. An activist like Bill Ackman doesn't just hope for the best; he diagnoses problems and publicly, and privately, pressures the company to implement his "cure."
This typically involves:
  * Taking a large minority stake in a company (often 5% to 10%).
  * Publishing detailed presentations and research explaining why the company is undervalued and what needs to change.
  * Engaging with management, sometimes seeking seats on the board of directors to gain direct influence.
  * Waging a public relations campaign to win the support of other shareholders for their proposed changes.
The goal is to shake up the status quo and force the company onto a more profitable path, thereby increasing the stock price.
==== The Value Investor's Lens ====
Pershing Square’s activism is deeply rooted in value investing principles. The firm looks for what Ackman calls "simple, predictable, free-cash-flow-generative, dominant businesses." These are high-quality companies that, for one reason or another, the market has discounted. The "activism" part of the strategy is simply the tool used to close the gap between the current stock price and the company's higher [[intrinsic value]]. Instead of waiting for a catalyst to happen, Pershing Square //becomes// the catalyst.
===== Famous Campaigns: Hits and Misses =====
Ackman's career is a masterclass in the high-stakes nature of activist investing, marked by spectacular successes and equally dramatic failures.
==== The Wins ====
  - **Canadian Pacific Railway:** In one of the most famous activist victories, Pershing Square invested in the underperforming railroad, arguing it was poorly managed. After a tough proxy battle, Ackman successfully replaced the CEO and several board members. The new leadership dramatically improved efficiency, and the stock’s value soared, generating billions in profit for Pershing Square's investors.
  - **Chipotle Mexican Grill:** After the restaurant chain was hammered by food-safety scandals, Ackman saw a quality brand in crisis. Pershing Square took a large stake, helped overhaul the board and bring in a new CEO, and played a key role in the company's stunning turnaround.
==== The Lessons Learned ====
  - **Valeant Pharmaceuticals:** This was a catastrophic loss for Pershing. Ackman made a huge bet on the pharmaceutical company, praising its business model. However, the company collapsed amid accusations of fraudulent accounting and price gouging, costing Pershing Square billions and serving as a painful lesson on the risks of investing in highly complex businesses with aggressive strategies.
  - **Herbalife:** Perhaps Ackman's most famous battle was his massive [[short sell]] against Herbalife, a multi-level marketing company he publicly declared a [[pyramid scheme]]. The five-year war pitted him against the company and rival billionaire [[Carl Icahn]] in a dramatic, public fight. Ultimately, Ackman was wrong; Herbalife's stock rose, and he was forced to abandon his bet after losing nearly $1 billion.
===== What Can the Average Investor Learn? =====
While you probably won't be waging a proxy battle against a Fortune 500 company, the principles behind Pershing Square's strategy offer valuable lessons for any investor.
  * **Focus on Business Quality:** Before you invest, ask if the company is simple to understand and has a durable competitive advantage. Great long-term investments are often found in dominant, cash-producing businesses.
  * **Management Matters:** The quality of a company's leadership is critical. Read shareholder letters and pay attention to how management talks about its successes and failures. Are they good stewards of your capital?
  * **Concentration is a Double-Edged Sword:** Pershing Square runs a highly focused portfolio. This strategy of [[concentration]] can lead to incredible returns when you're right, but it can also lead to devastating losses when you're wrong (like Valeant). For most individual investors, proper [[diversification]] is a much safer path.
  * **Have a Thesis:** Ackman never invests without a clear, well-researched reason. As an investor, you should be able to simply explain //why// you own a particular stock and what you believe will cause its value to grow over time.