Bill Ackman says investors should choose businesses that can generate substantial value across decades, even during temporary market closures. Ackman founded Pershing Square USA, Ltd. and serves as CEO. Ackman discussed the approach in a podcast interview with Norges Bank Investment Management CEO Nicolai Tangen, published on Wednesday. Ackman said a great company should give investors high confidence of owning something extremely valuable after 10 or 20 years, even if markets close for two decades.
Ackman said attractive businesses can come from different industries. Ackman likened preferred investments to royalty businesses or annuities capable of prolonged rapid growth without substantial reinvestment. Ackman said perhaps 200 to 300 businesses meet the standard of a truly great company. However, Ackman said fewer trade at prices that also make the shares great investments.
Ackman recommended examining the arguments of the strongest short seller covering a company an investor owns. Ackman said investors should assess whether the short seller's objections change the investment thesis or can be systematically refuted. Ackman said successfully rebutting every argument can strengthen an investor's confidence.
Pershing Square maintains concentrated investments in Amazon.com Inc., Microsoft Corp., Meta Platforms Inc., Brookfield Corp., Uber Technologies Inc., Visa Inc. and Mastercard Inc. Ackman said Pershing Square screens companies for lasting competitive advantages and predictable cash generation over the long term. Ackman said businesses must be sufficiently predictable to value confidently over 10 to 20 years. Ackman places greater weight on business durability than on near-term earnings. Ackman avoids companies heavily dependent on uncontrollable outside forces, including commodity prices, interest rates and regulation. Ackman said investors frequently pursue quick wealth, while asset managers generally favor short horizons over the long-term business perspective associated with Warren Buffett.
Ackman has invested in Netflix Inc. again after losing more than $400 million in 2022 and selling because of concerns about Netflix's outlook. Ackman forecasts annualized returns “well into the 20s.” Ackman now describes Netflix as a “high-growth utility,” pointing to loyal subscribers, pricing power and continued earnings growth. Ackman assessed Netflix's latest quarter positively despite the share-price decline following earnings. Netflix increased third-quarter operating income by 37% to $4.46 billion. Netflix experienced fewer cancellations despite raising prices.
Bill Ackman Shares Long-Term Investment Criteria for Great Stocks
BenzingaShare
Summary
Bill Ackman, founder of Pershing Square USA, Ltd., shared his long-term investment criteria in a recent podcast. He stressed that great stocks must remain valuable even if markets close for 20 years, citing Amazon, Microsoft, and Netflix as examples. On-chain data supports the durability of such companies. Ackman looks for predictable cash flow and long-term competitive advantages. The fear and greed index may fluctuate, but strong fundamentals endure.
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