He is not your average Value Investor but he pursues the fundamentals of a company with gusto. Of all the names silver haired William “Bill” Ackman has been called, an “activist” investor is probably the kindest. He has made both good calls and bad, with  both getting a lot of publicity.

His hedge fund, Pershing Square Capital, founded in 2003, often fights to gain seats on a company’s board of directors, and then presses for changes. Usually, really big ones. He has been compared to Carl Icahn, only more charming. His modus operandi is to get a company to sell its real estate or corporate divisions. The proceeds of the sale are then returned as dividends, followed by a higher stock price. Pershing then unloads its position at the higher stock price.

Bill’s business career has been “interesting” since he started in 1992. Ackman co-founded Gotham Partners with fellow Harvard class mate, David Berkowitz. The fund invested in private companies and real estate concerns.

In the early years, a series of smart bets resulted in double digit returns being posted. By 1998, Gotham Partners held more than $500 million in assets.  Fueled by this success, the pair made a fatal mistake of buying a controlling interest in a golf course operator that constantly bled cash.

In order to buy more golf courses, more debt was added.

Financial indigestion resulted. To pay off the debt, Ackman tried to merge First Union Real Estate, a cash flush business in which he held a controlling interest with his golfing concern, only to meet resistance from the minority shareholders who felt shortchanged.  A New York judge agreed with them and overturned the merger in 2002. This was the killer blow to Gotham Partners in 2003.

One of Ackman’s much publicized and profitable corporate battles was with MBIA which began 2002, over their AAA rating. Even though Eliot Spitzer investigated Ackman he was eventually vindicated when the 2008 subprime crises hit, and Pershing Square Capital made billions by shorting MBIA. It showed a couple of things about Ackman. He was willing for others to think he was wrong, dead wrong. And he was colossally tenacious. His experiences with MBIA were featured in a book, Confidence Game.

Perhaps his biggest success was his investment in General Growth Properties which he bought at $1 and yielded a 1500% return after it emerged from Bankruptcy.

His investment style does make headlines; Bill Ackman can also be called a “newsworthy” investor. Most recently he has invested in the mid level JC Penny retail chain with a 16.5% stake in the company, which may be rising to 26% now that he has a seat on the board. With 41 million square feet of company owned retail space, Ackman will probably attempt to “unlock” some of the value of this real estate. Or he will attempt to turn the company around since he brought in a former Apple Executive in charge of retail sales to lead the retail behemoth.

Bill Ackman will be one of the featured speakers at the Value Investing Congress on October 17-18^th in New York. I hope you will join me there. If you would like more information about this or other Value Investing Conferences you can go to my Conference page.

Disclaimer: I will be attending the Value Investing Congress in October since I am a media sponsor. I don’t own any of the stocks mentioned in this article. I may change my mind at any time and subsequently purchase an equity mentioned if I find it fits my investing strategy.

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