- Bill Ackman of Pershing Square made the correct bets when US stock markets crashed in the first quarter. So far, he has been outperforming the S&P 500 by a wide margin this year.
- However, Ackman has sold his stake in Berkshire Hathaway. Warren Buffett has been trailing the S&P 500 this year.
Bill Ackman and the US stock market crash
Bill Ackman of Pershing Square is one hedge fund manager who profited from the US stock market crash in the first quarter. He made money on both the long and the short side. First, as US stock markets crashed in the first quarter, Bill Ackman brought credit protection policies. The bet played out well as credit spreads widened amid the stock market crash. However, the spreads soon reverted to more normalized levels. The Fed sprung into action and pumped unprecedented liquidity into markets.
The Fed’s massive stimulus was one reason why Berkshire Hathaway’s chairman, Warren Buffett, wasn’t able to find tempting deals even as the US stock markets crashed.
According to Bill Ackman, after March 12, he started exiting his hedging positions and buying stocks. Eventually, Pershing Square turned $2.7 million into $2.6 billion. The trade would go down among the most iconic trades in history. Paul Tudor Jones profiting from the 1987 Black Monday and Michael Burry’s bet against the US housing market are some of the other iconic trades. Last year, Burry warned that ETFs could trigger the next market crash. Read A Market Crash Due to ETFs? Michael Burry Weighs In to learn more.
Bill Ackman brought stocks in the crash
As Bill Ackman exited his bets on credit, he bought stocks as US stock markets crashed. He brought shares in Hilton, Starbucks, Lowe’s, Restaurant Brands International, and Berkshire Hathaway (NYSE:BRK.B). After making money from the US stock market crash, Ackman was correct in going long on markets.
Berkshire Hathaway and Warren Buffett
While Bill Ackman’s bet on stocks went right, he didn’t make a lot of money from his investment in Berkshire Hathaway. So far, Berkshire Hathaway has been underperforming the markets this year. Eventually, Ackman gave up on Berkshire Hathaway and Warren Buffett and sold the shares.
There are multiple reasons why Berkshire Hathaway’s returns have trailed the S&P 500 (NYSEARCA:SPY). Read Why Warren Buffett and Berkshire Are Underperforming to learn more.