Call it the Ackman effect.
The news Thursday that billionaire Bill Ackman's investment firm purchased six new holdings in the second quarter prompted market-topping moves in five of them, illustrating that Ackman can move stocks.
Funds run by Ackman's Pershing Square purchased Netflix, Intercontinental Exchange $(ICE)$, Visa, Mastercard, S&P Global and Alcon in the second quarter.
In trading Thursday, Netflix rose 5.4% to $78.24; ICE gained 2.6% to $155.24; Mastercard was up 1.3% to $567.04; Visa rose 1.7% to $365.45; S&P Global gained 3.1% to $422.67 while Alcon was down 0.1% to $73.52. The S&P 500 was up 0.7% in the session.
One reason that Ackman has impact is that he writes well and makes strong investment cases for the stocks that his firm purchases. It also helps that Ackman is a celebrity investor with almost 3 million followers on X and a strong long-term record. His largest fund has performed poorly over the past year, however.
In a sign of Ackman's influence, S&P Global rose more Thursday than its chief rival, Moody's, while ICE outperformed its major peer, CME Group.
Ackman's two main funds are the $14 billion Pershing Square Holdings, a European-listed closed-end fund traded in the U.S. under the ticker PSHZF, and Pershing Square USA, a U.S. listed closed-end (PSUS) with $5 billion in assets that went public in late April.
Ackman gained his reputation as an activist but he now focuses on buying what he views as high-quality growth companies. His concentrated portfolios include Meta Platforms, Amazon.com, Microsoft and Brookfield. He tends to buy growth companies when they fall from favor with investors for one reason or another -- reasons that Ackman feels are misplaced.
Ackman laid out his investment case for the six new holdings as well as existing ones in a letter to holders of Pershing Square USA posted before the stock market opened on Thursday.
Ackman was attracted to Netflix, the streaming leader whose stock had fallen almost 50% from its 52-week high.
"Netflix has effectively won the streaming wars. Its subscriber base now exceeds any competitor's by a wide margin, and that scale is self-reinforcing. Netflix can outspend rivals on content while spreading the cost across the industry's largest user base, improving both the value proposition for subscribers and profitability for the company," wrote Ackman and the fund's chief investment officer, Ryan Israel.
Here's his take on S&P Global, which owns the S&P bond rating service and the index business that includes the S&P 500. S&P Global stock $(SPGI)$ is down 16% this year on concerns about slowing growth.
"Each of SPGI's benchmark franchises is a high-margin, IP licensing business with a formidable competitive moat inside an oligopolistic market structure. Ratings, the company's largest and namesake business, is a powerful effective duopoly alongside Moody's, with each company rating over 95% of U.S. corporate debt as most debt issuances are rated by at least two agencies," Ackman and Israel wrote.
Ackman has a strong long-term record, but the performance of his largest fund, Pershing Square Holdings, a European-listed closed-end fund traded in the U.S. under the ticker PSHZF, has been weak this year. The fund also is behind the S&P 500 over the past one and five years.
The fund's net asset value was down 4% year to date through Aug. 11, against a roughly 14% return for the S&P 500. The stock price of the fund is down even more, falling about 18%, as its discount to NAV widened.
Pershing Square Holdings has been hurt this year by declines in such holdings as Meta Platforms and Howard Hughes.
Over the year ended July 31, the fund's NAV was down 2.5% versus a nearly 20% return for the S&P 500, and the NAV gained 61.5% over five years, behind the index's 82% gain, Bloomberg calculations show.
Pershing Square USA stock has performed poorly since its launch in April, falling almost 20% to $40.62, hurt by the market-trailing performance of its portfolio and a widening of its discount to NAV. It went public at $50 a share.
Ackman vowed to work on narrowing the discount through better marketing.
"We believe it represents an extraordinary bargain at the currently large discount to NAV at which it trades. To solve this issue, we need to broaden the universe of investors and financial advisors that know of PSUS' existence and understand the Pershing Square story. We are on it," Ackman and Israel wrote.
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