PSH.L - Pershing Square Holdings

[thepupil]

nice, 57% of NAV if it doesn't trade up tomorrow. buying billy's portfolio for 57 cents ain't bad, fees and all.

[investmd]

Amazing

 

For all the dates listed - it trades at a discount of approx 25% to NAV - why?

 

[mcliu]

Amazing

 

For all the dates listed - it trades at a discount of approx 25% to NAV - why?

 

I think a combination of management fees, low liquidity, holdco discount, persistent fear Ackman does something stupid like Valeant?

[BG2008]

I am super curious how Pershing Square hedged their portfolio.  I bought puts as well and are up 10-40x across a dozen names.  But my portfolio is not holding up as pretty as PSH.  If anything PSH's long portfolio has probably gotten hit harder than mine.   

[BG2008]

nice, 57% of NAV if it doesn't trade up tomorrow. buying billy's portfolio for 57 cents ain't bad, fees and all.

 

Is there a PFIC issue owning Pershing Square? Some sort of tax issue?  I vague recall that was the case.  I don't own any Fairfax India for that specific reason. 

[Jurgis]

nice, 57% of NAV if it doesn't trade up tomorrow. buying billy's portfolio for 57 cents ain't bad, fees and all.

 

Is there a PFIC issue owning Pershing Square? Some sort of tax issue?  I vague recall that was the case.  I don't own any Fairfax India for that specific reason.

 

Yes, Pershing is PFIC. You can still hold it in IRA without tax issues (presumably, I'm not your tax professional and all that). There might be complications with 401(k) due to ERISA regulations. Consult your tax professional. Read this thread from beginning or reconsult thepupil ( https://www.cornerofberkshireandfairfax.ca/forum/investment-ideas/pshne-pershing-square-holdings/msg390736/?topicseen#msg390736 )

[Okonomen]

Yes PSH looks cheap right now, but as has been stated before, they are VERY exposed to hotels, restaurants and general consumer retail. I dont even dare to think about Hiltons next couple of Q earnings. If the whole world stands still these stocks will show disastrous reports. i know the long term value will be another story, but I'm also thinking... what about debt covenants?

[ukvalueinvestment]

Not relating to Hilton - but more as a general point:

 

There is going to be a vast amount of forgiveness on debt covenants globally because:

 

- Politically, you can't be bankrupting hospitality businesses (lots of which are family owned) because of this.  Lots of governments have already announced specific measure.

 

- Banks want to forgive because:

- Their core business is making sound loans.  If they defaults 50% of their loan book they themselves will probably default.  There is no reason to default Hilton if their long term business is sound.  Also banks just don't have the personnel to be working on the Hiltons of this world when there are far more complicated issues in their loan books where they do need to put the workout team to work.  Extract a little flesh from the Hilton's but not too much and move on.

[Okonomen]

Not relating to Hilton - but more as a general point:

 

There is going to be a vast amount of forgiveness on debt covenants globally because:

 

- Politically, you can't be bankrupting hospitality businesses (lots of which are family owned) because of this.  Lots of governments have already announced specific measure.

 

- Banks want to forgive because:

- Their core business is making sound loans.  If they defaults 50% of their loan book they themselves will probably default.  There is no reason to default Hilton if their long term business is sound.  Also banks just don't have the personnel to be working on the Hiltons of this world when there are far more complicated issues in their loan books where they do need to put the workout team to work.  Extract a little flesh from the Hilton's but not too much and move on.

 

I understand ur argument but at the end of the day banks cannot "forgive" such a large share of clients. For how long will they have to "forget" the covenants?? I see a potential huge domino effect here and potential chap 11's with dilution. The government are talking much about helping airlines etc but what about regular retailers or other businesses that rely on consumption?

[ukvalueinvestment]

I am still working under the assumption that we are at the depths of confusion and uncertainty and things will get better and more orderly over next few weeks.

 

Hilton is at the bottom of the list in terms of customers that banks and the government want to put into default.

[SharperDingaan]

Not relating to Hilton - but more as a general point:

 

There is going to be a vast amount of forgiveness on debt covenants globally because:

 

- Politically, you can't be bankrupting hospitality businesses (lots of which are family owned) because of this.  Lots of governments have already announced specific measure.

 

- Banks want to forgive because:

- Their core business is making sound loans.  If they defaults 50% of their loan book they themselves will probably default.  There is no reason to default Hilton if their long term business is sound.  Also banks just don't have the personnel to be working on the Hiltons of this world when there are far more complicated issues in their loan books where they do need to put the workout team to work.  Extract a little flesh from the Hilton's but not too much and move on.

 

This only works as long as the same old, same old, continues to prevail.

The Hiltons are indeed great businesses, and that's the problem ....

 

An enterprising lad simply makes the banks overworked workout team a very good offer for the Hilton debt, at cents on the dollar. Then forces a swap of the debt for 25%+ of the equity after dilution; to obtain a large equity slug - that the existing owners would never otherwise have parted with in a million years. Stink up the place, and as soon as the business recovers; the existing owners make our odious lad an offer for the equity that cannot be refused. Reject the first few bids, then eventually accept one.

 

Everyday practice in the seedier parts of town. The only difference here, is better quality clothes.

The families partied hard, blew it, and now the debt collectors are here. Rags to rags in 'X' generations, just doing its thing.

 

SD

 

 

 

[thepupil]

initiated today in the ADR in an IRA of an accredited investor (I think that protects me from PFIC).

 

Leaving a few bullets in the chamber as clearly the hedges aren't perfect, the portfolio has modest long-term leverage with the bonds and I expect more volatility.

[Spekulatius]

I am still working under the assumption that we are at the depths of confusion and uncertainty and things will get better and more orderly over next few weeks.

 

Hilton is at the bottom of the list in terms of customers that banks and the government want to put into default.

 

Hilton is a capital light business that provides branding and marketing support to the real owners Hotels. I am not sure about Hilton, but I think MAR gives performance guarantees to franchisees for newbuild Hotels, which allows them to get cheap loans. That would be something to look at in Hilton’s 10-k‘s.

 

Bailing out Hilton will do very little to help the Hotel owner who has mortgage loans and employees to pay. They will bear the brunt of the downturn and may net helps to prevent them going under. Hilton itself („

as well as MAR and IHG)  are just the somewhat symbiotic leech on top of the Hotel ecosystem and capital structure, similar to GP‘s in MLP‘s. The whole system is also similarly levered.

[johnny]

Around 188,000 shares repurchased on March 20, at around $14, around $2M in NAV discount captured. I guess that works out to about a penny increase in NAV per share. Congrats, all.

[thepupil]

https://finance.yahoo.com/news/bill-ackman-makes-2-5-181343209.html

 

going all in, took off all the hedges, good times. loved the stable NAV at 60 cents on the dollar, love the levered beta at 60 cents on the dollar.

[Liberty]

 

https://pershingsquareholdings.com/pershing-square-capital-management-l-p-releases-letter-to-investors/

 

On March 23rd, we completed the exit of our hedges generating proceeds of $2.6 billion for the Pershing Square funds ($2.1 billion for PSH), compared with premiums paid and commissions totaling $27 million, which offset the mark-to-market losses in our equity portfolio. Our hedges were in the form of purchases of credit protection on various global investment grade and high yield credit indices. Because we were able to purchase these instruments at near-all-time tight levels of credit spreads, the risk of loss from this investment was minimal at the time of purchase.

 

[abitofvalue]

 

https://pershingsquareholdings.com/pershing-square-capital-management-l-p-releases-letter-to-investors/

 

On March 23rd, we completed the exit of our hedges generating proceeds of $2.6 billion for the Pershing Square funds ($2.1 billion for PSH), compared with premiums paid and commissions totaling $27 million, which offset the mark-to-market losses in our equity portfolio. Our hedges were in the form of purchases of credit protection on various global investment grade and high yield credit indices. Because we were able to purchase these instruments at near-all-time tight levels of credit spreads, the risk of loss from this investment was minimal at the time of purchase.

 

 

so roughly 100x in a matter of weeks.  Nuts..  makes up for some of the Valeant losses.  he is an intersting one - gets 100x on this, like mult-100x on GGP and then does Target / Valeant / JCP.. .

[Gregmal]

Ackman is a character, but absolutely worth paying attention to. Very similar to Berkowitz. Does a lot of shit that initially you think is crazy, half the time it turns out to be genius, the other half it just ends up being crazy.

[thowed]

Ackman is a character, but absolutely worth paying attention to. Very similar to Berkowitz. Does a lot of shit that initially you think is crazy, half the time it turns out to be genius, the other half it just ends up being crazy.

 

Thanks, I think this sums it up perfectly.  I keep on being tempted to invest because of the genius stuff, but I pause because you never know if next year is going to be crazy...

[thepupil]

the fee/liquidity/and general CEF discount do give you a 40% head start on that crazy genius. People invest in far crazier things at lower discounts. In the end, he owns a lightly levered (actually not so much anymore given cash, but there are long term bonds), portfolio of blue chip stocks. This may change before you can react, but nothing is risk free and you can have a perfectly clean story or a cheap stock, not both.

 

there are larger discounts out there (fellow Amsterdam listed pupil holding Tetragon Financial trades for a 65-75% discount for example) but Tetragon has no high watermark, 14% of its NAV in CLO equity and a large percent in the mark to model value of asset management companies, it's a far worse structure and far less transparent.

 

Show me a cheaper blue chip equity CEF!

 

the dude blew 10 years of track record in valeant, you think he's going to get 20-30% long a super highly levered company again? I just don't think so.

 

Owning HHC, Berkshire, Starbucks, hilton w/ light leverage at a 40% discount is attractive. the low-risk 100x to protect NAV in the worst sell-off in some time doesn't hurt either.

 

 

 

 

[ukvalueinvestment]

I agree.  I just think this is a very good alternative to an S&P500 index fund.  There's a lot that can "go right". He could not do crazy things and outperform.  He could liquidate the fund.  The discount could close given his outperformance over last 2 years.  He continues to buy back stock.

 

He has publicly said he will no longer do "crazy things" and has gone back to basics, which is burned out by his actions over 2 years.

 

I am mulling whether to buy this or a levered ETF when I judge that the Pandemic newsflow has bottomed and there is a path out of this mess.

[james22]

He has publicly said he will no longer do "crazy things" and has gone back to basics, which is burned out by his actions over 2 years.

 

Does he think buying up Fannie Mae/Freddie Mac crazy?

[johnny]

Yeah, I've made this a pretty substantial position this week along the following lines:

 

1. I think he has an above average chance to beat the market in the recovery, even re-basing right now. I do not think he was sitting around idly philosophizing about whether or not to double down on Hilton, for example. I suspect his analysis/information here is much better than mine is likely to be, and I'm more than happy to delegate the timing and distribution of the "hospitality recovery?" chunk of my portfolio to him. Eh, let's not mince words--I think he'll have a clearer understanding of where the best bailout rents are faster than I will.

 

2. As I've mentioned, this gap will only be maintained if his actual NAV tanks from here--there's just going to be too strong of a "trade of the decade" narrative for him to not become a very popular/reviled figure in all of this. Even the left will help--I've seen a few tweet takes characterizing his trade as "profiting off of our misery" etc and calling for investigations. If Elizabeth Warren and Bernie Sanders want to make him a symbol for Wall Street Greed and Evil Short Sellers, etc. I think that is a NAV discount narrower in and of itself. All press is good press, in this situation.

 

So, even if his outcome distribution was exactly the same as the S&P, #2 would make the payoffs attractive. I think this is sort of a no brainer if you're a coward like me that wants to stay 50% cash at this point. I'm not sure this makes sense if the other 90% of your portfolio is AER; just go all in there.

[matts]

Pershing Square Holdings, Ltd. Issues 2019 Annual Report and Financial Statements, Announces Annual General Meeting in Guernsey and Additional $100,000,000 Share Buyback Program

 

https://www.businesswire.com/news/home/20200406005852/en/

 

[mcliu]

Has there been any reports on who the counterparty is to his CDS trade?