Sitting on a double-digit loss that is the deepest in his firm’s history, billionaire investor Bill Ackman on Tuesday told investors that he made mistakes last year in not cutting two big positions but said he sees plenty of new investment opportunities.
Ackman, whose Pershing Square Capital Management lost between 16% and 20% in its funds in 2015, said it was a “very costly” mistake that he did not sell drug maker Valeant Pharmaceuticals (VRX) when the stock price rose to $200 over the summer.
He also said that right along with Valeant’s tumble “the rest of our portfolio went into free fall which continued up until the present.” His Pershing Square Holdings portfolio has lost roughly 14% this year alone.
But Ackman said he could not sell when he became aware of a large potential transaction that the Canadian drug maker Valeant was working on. Valeant’s stock price tumbled some 70% amid questions about its business and accounting practices. Now with hindsight, Ackman said “We should have avoided becoming restricted to preserve trading flexibility.”
Pershing Square ended up selling some Valeant shares at year’s end to take a loss for tax purposes.
Similarly, he feels the firm should have cut its stake in Canadian Pacific (CP) when it reached Canadian $240 per share, and he said it was a mistake to buy more shares in Platform Specialty Products (PAH) at $25 a share to help the company finance an acquisition.
Ackman said last year’s sharp drop reminded investors that stocks can “trade at any price in the short term” which underscores why his firm shies away from using margin leverage. “We expect that there have been many margin loan liquidations in recent weeks which have contributed to dramatic stock price declines.”
Late last year, Ackman cut the firm’s position in candy maker Mondelez (MDLZ) by selling forward contracts representing 15 million shares at an average price of $44 a share. During the summer the firm built a large notional short position in the Chinese yuan to guard against weakness in the Chinese economy. But so far, he has made only a modest profit.
Ackman also said that Paul Hilal, a partner at the firm and Ackman’s college roommate, is leaving the firm to pursue his own venture, which Ackman said he expects to participate in at some point. As for himself, Ackman is sticking with his firm, noting that he has no plans to step down.