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Bill Ackman versus Warren Buffett: A Tale of 2 Legends

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  • While Bill Ackman has managed to beat markets, Warren Buffett has underperformed. Recently, Pershing Square dumped all of its holdings in Berkshire Hathaway.
  • Pershing Square outperformed the markets by a wide margin last year. So far, Pershing Square has been outperforming the S&P 500 this year as well.
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Bill Ackman

Bill Ackman is having a true dream run. Last year, Pershing Square outperformed the S&P 500 (NYSEARCA:SPY) by a wide margin. The fund delivered 8.7% returns in May. So far, the fund has risen 27.5% for the year. In contrast, SPY has fallen by 4.6%. Ackman shorted the market in March and covered his position to net in over $2 billion. His long positions also delivered good returns. However, Ackman’s bullishness on Warren Buffett and Berkshire Hathaway didn’t pay off. Recently, he exited all of the holdings in Berkshire Hathaway (NYSE:BRK.B) stock.

Warren Buffett and Berkshire Hathaway

While Bill Ackman’s Pershing Square is in the green this year, Berkshire Hathaway has fallen almost 18% in 2020. Warren Buffett, Berkshire Hathaway’s chairman, trailed SPY by a wide margin last year also. In fact, 2019 was Buffett’s worst underperformance in a decade. In August 2019, Ackman took a position in Berkshire Hathaway. He said that it was undervalued. However, he exited the stock last month. Notably, Warren Buffett’s performance since 2009 hasn’t been inspiring. He has underperformed the S&P 500 since the beginning of 2009.

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Bill Ackman versus Warren Buffett

There are several factors that hamper Warren Buffett’s performance. Bill Ackman’s timing and stock selection have been impeccable. None of the fund managers can time the market correctly all the time. However, Warren Buffett has been a little too conservative with Berkshire Hathaway’s cash.

Over the last decade, the value investing strategy has underperformed the growth strategy. Ashwath Damodaran, popularly known as the “dean of valuation,” said that traditional value investing strategies are losing relevance.

Pershing Square

Given the surge in Pershing Square’s stock price, it’s a likely candidate for inclusion into the FTSE 100 Index. Meanwhile, the discount between Pershing Square’s stock price and the net asset value are still elevated. In May, Pershing Square repurchased 34,608 of its shares on the London Stock Exchange.

For now, Bill Ackman seems to be getting it right with his timing and stock selection. Was he correct to give up on Warren Buffett? Read Bill Ackman Gives Up on Warren Buffett, You Shouldn’t to learn more.

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