PSH.L - Pershing Square Holdings

[Guest cherzeca]

ackman and Berkowitz are similar.  they have outstanding long term records with a great deal of variance.  as for bill, even when he is wrong in outcome, he is often right in process (I would say he correctly analyzed HLF, but misinterpreted what the FTC would do), although not always (valeant was a complete miss). 

[thepupil]

I like PSH NA here at a record 30/31% discount for an IRA of an accredited investor [PFIC].

 

They are buying back a run rate or so of 4-5% of shares / year, every day in the market, the accretion from that more or less offsets management fees then you get a little moderate leverage from long term bonds  issued by PSH that costs 4.95%. PSH is amazingly back above its high water mark so you'll pay incentive fees. The portfolio quality has improved as the crap has left; major holdings like Berkshire, HHC, Agilent, Starbucks, etc are all "easy to own" at a 30% discount. Ackman is aligned. He owns $700mm of shares, which is meaningful in the context of the money he makes off of the management/incentive fees from external capital. He's acting like an owner rather than parasite by buying back shares.

 

The "correct" discount is 10-15% in my view. I would expect long term alpha to be -300 to +500 per year and would expect to see discount accretion on a 5 year basis of 300-500 bps as it normalizes. PSH NA is an anomaly in the CEF world in terms of its wide discount with liquid easily understandable balance sheer. So on a 5 year basis, I think one will match the market in a downside case and beat it meaningfully in a base case; there is a wide range of outcomes, but all in I think it's positively skewed. I simply don't see a repeat of the crappiness that was VRX/HLF etc. happening based on the current portfolio. Maybe Fannie Freddie goes to zero and it is actually trading at a tighter discount, but it won't completely impair the portfolio like being loaded to the gills with VRX did.

[EricSchleien]

Can it not be in an IRA of an accredited investor?

 

I like PSH NA here at a record 30/31% discount for an IRA of an accredited investor [PFIC].

 

They are buying back a run rate or so of 4-5% of shares / year, every day in the market, the accretion from that more or less offsets management fees then you get a little moderate leverage from long term bonds  issued by PSH that costs 4.95%. PSH is amazingly back above its high water mark so you'll pay incentive fees. The portfolio quality has improved as the crap has left; major holdings like Berkshire, HHC, Agilent, Starbucks, etc are all "easy to own" at a 30% discount. Ackman is aligned. He owns $700mm of shares, which is meaningful in the context of the money he makes off of the management/incentive fees from external capital. He's acting like an owner rather than parasite by buying back shares.

 

The "correct" discount is 10-15% in my view. I would expect long term alpha to be -300 to +500 per year and would expect to see discount accretion on a 5 year basis of 300-500 bps as it normalizes. PSH NA is an anomaly in the CEF world in terms of its wide discount with liquid easily understandable balance sheer. So on a 5 year basis, I think one will match the market in a downside case and beat it meaningfully in a base case; there is a wide range of outcomes, but all in I think it's positively skewed. I simply don't see a repeat of the crappiness that was VRX/HLF etc. happening based on the current portfolio. Maybe Fannie Freddie goes to zero and it is actually trading at a tighter discount, but it won't completely impair the portfolio like being loaded to the gills with VRX did.

[thepupil]

ownership by US persons is tricky, period. In fact, it's questionable whether an IRA of an accredited person can own it. It would be best to be owned in an IRA that's not a rollover or would not be considered ERISA money.

 

Owning in a taxable account is a no go unless you want to file PFIC form and have it taxed in an onerous fashion.

 

One can buy the less liquid ADR in a non rollover IRA of an accredited investor and I think that it's okay from what I've read.

 

 

The Placing Shares have not been and will not be registered under the applicable securities laws of the United States, Australia, Canada, Japan, New Zealand or South Africa. Subject to

certain exceptions, the Placing Shares may not be offered or sold within the United States, Australia, Canada, Japan, New Zealand or South Africa or into any other jurisdiction where to

do so would constitute a violation of applicable laws or regulations of such other jurisdiction or to any national, resident or citizen thereof. The Placing Shares may not be offered or sold to

or for the account or benefit of U.S. persons (‘‘U.S. Persons’’) as defined in Regulation S (‘‘Regulation S’’) under the U.S. Securities Act of 1933, as amended (the ‘‘Securities Act’’).

The Placing Shares are being offered and sold only to non-U.S. Persons in the Netherlands and selected other jurisdictions in offshore transactions in reliance on Regulation S, provided

such persons are also Qualified Eligible Persons (‘‘QEPs’’) under U.S. Commodity Futures Trading Commission (‘‘CFTC’’) Rule 4.7.

Neither the U.S. Securities and Exchange Commission (the ‘‘SEC’’) nor any U.S. state securities commission has approved or disapproved of the Placing Shares, nor have they passed upon

or endorsed the merit of the Placing or the accuracy or completeness of this Prospectus. Any representation to the contrary is a criminal offence in the United States. The Company has not

registered as an investment company under the U.S. Investment Company Act of 1940, as amended (the ‘‘Investment Company Act’’), and investors will not be entitled to the benefits of

that Act.

The Placing Shares may not be acquired by: (i) investors using assets of: (A) an ‘‘employee benefit plan’’ as defined in Section 3(3) of the U.S. Employee Retirement Income Security Act

of 1974, as amended from time to time (together with the applicable regulations thereunder, ‘‘ERISA’’), that is subject to Title I of ERISA; (B) a ‘‘plan’’ as defined in Section 4975 of the

U.S. Internal Revenue Code (the ‘‘IRC’’), including an individual retirement account or other arrangement that is subject to Section 4975 of the IRC; or © an entity which is deemed to

hold the assets of any of the foregoing types of plans, accounts or arrangements that is subject to Title I of ERISA or Section 4975 of the IRC (‘‘ERISA Plans’’); or (ii) a governmental,

church, non-U.S. or other employee benefit plan that is subject to any federal, state, local or non-U.S. law that is substantially similar to the provisions of Title I of ERISA or Section 4975

of the IRC.

Each Manager is acting exclusively

[thowed]

Cheers for this - it's good to hear an opposing view.  I felt like I was 'too late' on this given the performance YTD.  But the discount has been impressively stubborn - after the 1-2 Valeant / Herbalife hubris, I suppose it will take a while for people to fully regain confidence in him.

 

But it's a good point - it's a pretty solid portfolio of decent liquid stocks - and arguably in a bad case scenario acts as a S&P500 tracker at a hefty discount.

 

I still don't like the idea of him, as a textbook example of the smug 'Christopher Wool' owning class.  But this is the sort of thing that is fairly obvious in retrospect, and I often miss out on.

 

Next - is it too late to buy UK Smlr Cos Investment Trusts......

 

 

 

 

 

 

[Liberty]

2019 presentation:

 

https://assets.pershingsquareholdings.com/2020/02/05122230/PSCM-Annual-Investor-Update-Presentation.pdf

[ukvalueinvestment]

I think this is deserving of a large discount given Ackman's history and high fee structure, but the discount is a somewhat too high.  I would own this as an alternative to an S&P tracker.  But that's not to say I want to own too much of the S&P right now.

[thowed]

Should point to UK people e.g. UKValueInvestor that this is not an ideal purchase as they no longer have UK Reporting Fund status, so if you have Capital Gains they'll be taxed at Income Tax rates. 

 

Don't know reason for doing this, no small funds have a problem with it, so it comes across as another case of idiot, shareholder-unfriendly behaviour from the Ackmann camp.

 

On a pure stock level though, agree that it's still probably attractive at such a big discount.

 

For further unfriendly behaviour, see here:

https://citywire.co.uk/investment-trust-insider/news/avi-attacks-ackman-s-pershing-square-over-outrageous-borrowing/a1250697

[ukvalueinvestment]

It's starting to look interesting now that the S&P is cheaper and Ackman has said he bought downside protection.  Holding it in an ISA would get over the capital gains tax issue?

[muscleman]

https://www.cnbc.com/2020/03/18/bill-ackman-pleads-to-trump-to-increase-closures-to-save-the-economy-shut-it-down-now.html

 

Is it just me or does anyone else have a feeling that Bill is crying on the phone?

He said he was bearish and took a lot of measures. I see that as non-sense to calm down investors. PSH has been tanking just like the market. If he has taken the measures to adjust his portfolio, this wouldn't have happened.

[kab60]

PSH hasn't tanked like the market? They gave an update the other day, seems they bought a bit (a lot) of downside protection which more than covered their losses on the long. But that was days ago... (didn't hear the interview)

[muscleman]

PSH hasn't tanked like the market? They gave an update the other day, seems they bought a bit (a lot) of downside protection which more than covered their losses on the long. But that was days ago... (didn't hear the interview)

 

They are down from 21 to 14. I guess that's roughly in line with the market.

[longterminvestor]

If you look at portfolio, his world doesn't look great with exception to Berkshire so we know why he is crying (% is showing portfolio allocation):

 

HLT Hitlon CONSUMER DISCRETIONARY                   19.08%

LOW Lowes CONSUMER DISCRETIONARY                   16.81%

CMG Chipotle CONSUMER DISCRETIONARY                   16.75%

QSR Restaurant Brands  CONSUMER DISCRETIONARY    15.67%

BRK.B Berkshire FINANCE                                             14.82%

SBUX Starbucks  CONSUMER DISCRETIONARY             7.82%

HHC Howard Houghes REAL ESTATE                             4.54%

A Agilent Tech  INFORMATION TECHNOLOGY             4.52%

 

this is off of 13F filed 12/31 with recent 13D 2/24 filed showing reduction in Chipotle.

[ukvalueinvestment]

He hedged his whole portfolio with puts.  Hero move.

[Castanza]

Bill has no business saying things like "We will see millions dead." I generally agreed with what he said, but his "activism" should begin and stop at the business/investor role.

[johnny]

He shut down the office Feb 27, so it is definitely true that he was early on the virus.

[johnny]

He hedged his whole portfolio with puts.  Hero move.

 

Source?

[thepupil]

https://www.barrons.com/articles/bill-ackman-pershing-square-capital-fund-coronavirus-notional-hedges-51583335358

 

https://www.pershingsquareholdings.com/company-reports/weekly-navs/

 

his NAV was up in MArch as of the last report when market down. he definitely put on some convex hedges, but we don't know (and he specifically said he wouldn't say) the exact nature of those.

 

Pershing Square is very cheap and particularly attractive because you're buying a discounted portfolio of risk assets with tail hedges in there. now he could take them off too soon or it could otherwise go awry somehow, but its super interesting.

[johnny]

Yeah, if he covered the downside, you're buying at 50% NAV...and there's going to be a pretty serious restoration of the Bill Ackman Glow the story starts being marketed as the Trade of the Pandemic.

 

Just a question of whether or not naive, humble Bill Ackman will be able to make the most out of the trade, publicity wise. Anybody else concerned here???

[longterminvestor]

Tinfoil alert.  I hope, for the shareholders of Pershing Square, Ackman's counter parties on his hedge can deliver. 

[ukvalueinvestment]

Bill has no business saying things like "We will see millions dead." I generally agreed with what he said, but his "activism" should begin and stop at the business/investor role.

 

Dude - he said one million and, like he said, it's just maths.  He clearly made the caveat that he was talking about a situation where the government does nothing, and he does not expect that.  But it is the case that without stronger action, one million at least will die.

[thowed]

Awaiting the weekly NAV update with great interest.

 

I have a great frustration with the funds who have hedges but won't detail them.  Makes it impossible to value.

 

I don't see why the need for secrecy, assuming they're not single stock shorts?

 

I presume his portfolio would be toast without the hedges, given it's so heavy on restaurants and hotels (though I know that's probably mitigated as there's a lot of franchising involved).

 

The 42% discount is still a bit of a mystery after last year's performance, though I can see why many people might be suspicious of him, given the 'personality' of Ackman, and the inconsistent performance.

 

 

 

 

 

[Orchard]

To invest in a fund that's hedged is fairly stupid.

 

You're paying fees to stay flat.

 

If you like a hedged fund, keep your cash instead.

 

Invest it once you don't feel the need to be hedged.

[thepupil]

I would buy a hedged $1 for $0.5. If it doesn't grow and is returned to you in 10 years, that's 7% safe return. In actuality, I'd expect it to re-rate once folks see NAV didn't go down and/or when CEF discounts normalize if/when panic subsides.

 

Also, most view it the opposite, PSH was an anamoly for charging incentive on unhurdled long only exposure, now it’s just any old hedge fund.

 

The NAV is more stable and the NAV multiple blew out, should be at $22 not $15

[johnny]

Amazing