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Billionaire investor Bill Ackman recently invested billions of dollars in six different companies. My name is Daniel. You are watching Unrivaled Investing. Let's quickly go over what Bill Ackman finds attractive, as he recently acquired stakes in Visa and Mastercard. So, that's V and MA, Netflix (NFLX ), S&P Global (ticker symbol SPGI), Intercontinental Exchange (ICE), and Alcon.
The purpose of this video is to talk about each company separately. What does he see, understanding the thesis he is outlining? We will also look at several macro topics that I believe are important for investors to understand. I think the first most important macro theme that investors need to learn is that many are now turning to the question: "What's the most exciting thing right now?" And this is the artificial intelligence revolution.
I also believe in the artificial intelligence revolution. After all, I am the co-founder of Flash. You can see the link below. This helps analyze any company in the world using AI. But while there is so much hype around AI, there are stable companies that are showing reasonable growth or defining their markets, and their stocks are falling as capital flows into the AI sector .
So, if you look closely at others, you can see the opportunities that arise. And I think that's what billionaire investor Bill Ackman generally sees. Regarding Netflix, I find this one of the most interesting cases, as it previously sold its stake around 2022, losing about $400 million when they announced a loss of subscribers.
I recently released a video about Netflix where I praised the company and said, "Look, if you're a large institution, I think you should look at Netflix because of the combination of quality and valuation," and I think that's what you see in Bill Ackman's decision to buy a stake in Netflix. After all, he looks at it and sees that since then they have the largest subscriber base, which gives them the opportunity to influence pricing.
They have a rapidly growing subscription base with advertising, generating billions of dollars in advertising revenue. They have shown real discipline in how much they invest in content. I think this will become an even bigger tailwind thanks to the AI revolution. It will become easier to create content, and you can already see their margins increasing and free cash flow improving as well .
And the last important point—the stock has revalued from the “growth at any cost” position we have seen from time to time over the past decade to a figure close to a 20x future earnings multiple. And this is part of that 50 percent rollback . So, that's why I believed and pointed out on this channel that these large institutional investors who are growth-oriented and looking for a combination of growth and value should be looking at Netflix.
I think I also mentioned in my video that the calculations are adjusted a bit because they include one-time gains, but overall they're getting about a 3-4% free cash flow return. Then add to that potential growth of, say, 5–10% per year—it's no longer the hyper-growth market it used to be. But if you have 3-4% plus, say, 5% organic growth, then even before any valuation change, you get 8% intrinsic value growth , maybe even more, depending on Netflix's pace.
And that's what makes you think, " Okay, I can get a potential return of 10-something percent from this point." It is this combination of quality and value that attracts investors to Netflix. That's why I raved about it during a recent sale. So it's no surprise that Bill Ackman was buying stocks at this very moment.
It was interesting to see his theses on Visa and MasterCard. These are some of the highest quality businesses in the world. Essentially, it's a bet on a basket of companies, a recognition that both businesses are exceptional, rather than a choice between one or the other. He says they actually charge about 0.2% for a typical transaction, and it's available every minute, every day, all over the world.
And he believes their growth is evident. Card transaction volumes still account for about half of total consumer spending worldwide. There is also potential for growth, as it concerns their additional anti- fraud services and services for banks and card issuers. Looking at it, he says, "Yes, the stock has fallen to an earnings multiple of just above 20." There are some concerns about stablecoins, agent commerce, and possible regulation in the US.
And that's part of the reason why these stocks have fallen in price. But if they can continue to show 10–15% profit growth, that's probably pretty attractive. Because there is a chance that, say, in 5 years, the company will still be trading at the same multiple, but during that time it will grow by, let's say, 10-19 percent.
And this means that you, as an investor, will receive a corresponding profit . So I look at this and personally have some doubts about his confidence in the ability of stablecoins to fundamentally change the market. You see significant growth there. That said, I don't think we've seen enough evidence to say, " Okay, stablecoins are definitely going to destroy these payment systems." This is something to keep in mind in the coming years to watch for implementation trends.
I've already made a video about Circle as an example demonstrating hypergrowth—a very strong increase in the volume of USDC in circulation. Looking at S&P Global, it's a fantastic company with mostly regular revenue from benchmarks, data , analytics, and workflow tools in financial and energy markets that are mostly oligopolies or duopolies.
The reason this is important is because, for example, in the rating agency business, it's mostly a battle between S&P and Moody's. Fitch and others appear from time to time , but the market is mostly divided between these two giants. This is important because when you operate in duopoly and oligopoly markets, where there are only a handful of players, it is easier for you to maintain your margins.
It's easy for you to show profitability at 20-30%. This also indicates that it is difficult for new players to enter this market. And I think, frankly, when bonds get rated, institutions often say, "We won't even buy a bond unless it has an S&P or Moody's signature on it," and it's amazing that that's still the case, even after they failed so badly during the Great Financial Crisis.
Institutions are still required to say, “Hey, I need to get this stamp of approval from these rating agencies .” And the fact that this is written into the charters of some investment institutions makes it virtually impossible for third-party or smaller agencies to gain popularity. So that's part of the reason you're looking at S&P Global —it's just a great business.
It will be sensitive to capital markets to some extent because when you issue new bonds, it will change depending on whether the market is open or closed. And there were some concerns that artificial intelligence could potentially disrupt parts of that business. For example, they own Capital IQ, some of the market intelligence segments, and they say, "Hey, can AI break this?" " Can funds work with AI to find workarounds?" And that's part of the reason why the stock valuation has fallen from about 25 to 19 earnings multiples.
He still thinks, looking at the high quality of some of these, you know, different segments, that you can expect high single-digit sales growth plus, say, 4% annual share repurchases, and that gives you over 10% earnings per share potential. This is a very rough structure for S&P Global. I, you know, find it funny because I was actually drawing the attention of my subscribers to, you know, this is a teaser from a letter back in June where I called S& P Global a pretty interesting company.
And what really pushed it was that I saw the quality of the business, but I also noticed that a few insiders had been buying the stock recently. So seeing these insiders buying, plus recognizing the quality of the business, that was the reason I wanted to investigate deeper and, you know, tell my followers about it before Bill Ackman announced he was buying.
Before I move on to his last two purchases, which I think are perhaps the most interesting of all, I want to make sure you understand: none of this is financial advice. I'm just voicing, you know, his thesis, sharing my own thoughts, looking at each of these different companies. Also, a quick side note: Charlie Munger once said that there is no higher praise than earned trust.
So my day got a little better last week when I got an email from JL, a member of Unrivaled Investing, who wrote, "By the way, that stock was fantastic for me. You do a great job researching these companies and just laying out your findings. As for me, I bought more of those stocks than I should have and sold them at the same time you did.
And I made just under $30,000. Thanks for your work." If you're looking for compelling ideas, come to Unrivaled Investing. I expect to raise the price for our exclusive Discord community at the end of this month. So now is the time to lock in a good rate if you're planning to do so. Next, let's talk about, I would say, the second key lesson.
The first is the macro aspect, which is that while everyone is focused on AI, some quality companies are selling off, partly because of concerns that AI might disrupt, you know, small parts of their business. So the valuation has come down, and Bill Ackman says, "Well, that's great." I can buy these quality businesses at prices I like.
This is the second key lesson, for me, if you look at what he's buying, his portfolio: you see that over the next 12 months he's targeting a price-to- earnings (P/E) ratio of about 19 on average, while the S&P is closer to 20. And he thinks that the earnings per share growth for these companies will average about 20%, which is a pretty impressive number that he expects compared to the S&P 500, where it will be about 12%; at least that's what is expected.
And that brings us to the point I was making about Netflix: when you get a high-quality business at a market valuation, and you think it will show potentially higher growth than, say, the overall GDP, the economy, or the indices, it becomes a priority for investors like Bill Ackman. And he's not the only one thinking: "Wait a minute , if the price is average or below average and the quality is average or above average, then it's worth considering." And I think that's what you're seeing with his buying lately, what he's talking about.
These are companies of above-average quality at average or slightly below- average prices. I don't think any of this reflects deep-value investing. I view them as promising ideas that have potential because higher quality at average or lower ratings means they are more likely to outperform the indices over time.
So I understand the appeal. It's also important, I think, to understand the basic math: when you look at a company with a multiple of about 20 to free cash flow or less, or 20 to earnings or less, you're talking about a 5% return to potential shareholders. So if you have that 5% return, and you can say, " You know what?
I'm pretty sure you're going to grow in the high single digits in the coming years, or maybe even low double digits , then you're automatically talking about a situation very similar to the one I was showing with the Netflix example. You get free cash flow returns as a shareholder, plus that organic growth.
So, if you can get, say, a 5% free cash flow yield, trading at a price that is 20 times earnings or less, and still get 5% or more organic growth, you are automatically talking about 10% annual growth in intrinsic value . And then if you say, "Hey, maybe the growth will actually be closer to 10% per year." Now we are talking about double-digit returns , which, as a rule, significantly exceed American indices , which are usually in the high single digits, in the range of 7-8%.
The next two companies, one of which is Alcon, ALC, are the world's leading ophthalmic equipment manufacturers. We are talking about operations in front of our eyes with 30,000 pieces of equipment worldwide and an installed base. This is a "razor and blade" model. You sell equipment, usually at a lower margin, but then you have certain consumables that need constant updating , at a much higher margin.
Management believes that the profit potential, and Ekman also thinks that the profit potential could be significantly higher over time, is currently earning about 20% margins. They say, "Hey, they think they can get closer to 25% with more scale and increased contact lens sales." Ekman also notes that Alcon has a potential "lottery ticket" with its experimental single- cell therapy AURN001, which aims to repair damaged corneal cells and could replace some corneal transplants in the future.
It's currently undergoing FDA review, they're trying to get , I think, FDA Level 3 approval. So this could be, you know, a billion dollar annual sales potential, which could add significantly, maybe somewhere between 10% and 25% to their free cash flow over time, if it gets approved. So, that's right , and Ekman does think this has a higher than average chance of approval.
So, looking at a business, even ignoring this " lottery ticket" potential, with sales growth in the high single digits, as we just discussed -- between the launch of new equipment, the volume of cataract surgeries, let's say, an aging population that requires more eye procedures -- and looking at a business that's trading at an earnings multiple in the high teens .
This is exactly the same logic we just talked about: free cash flow available to shareholders, plus a high single-digit organic growth rate, and that 's how you can get, let's say, an above-average potential return. And lastly : Intercontinental Exchange. Personally, I find this very interesting because the company is headed by its founder, which is exactly what I like.
This is a company with a history of creating value for shareholders, which also impresses me a lot . You know, since the IPO in 2005, profitability has grown by about 18%, and profits by 15 %, and Ackman calls this a landmark financial infrastructure, where about 70% of the income comes from the stock market.
For example, they dominate Brent crude futures trading, where ICE (Intercontinental Exchange) has a market share of around 90%. The valuation has come under severe pressure over the past few years, falling to earnings multiples in the high teens due to concerns about AI crowding out certain products, as well as industry changes where perpetual futures are gaining popularity.
They are designed for 24/7 retail, usually cryptocurrency, but how will this extend to some of the products ICE works with? Ackman argues that the largest institutions will always seek to operate in the deepest markets, and perpetual futures, which are regulated outside the US, are more likely to cause crashes and do not have the liquidity that ICE offers.
So he believes that over time they will be protected, and eventually you will probably get some kind of regulatory protection. Looking at the obvious growth potential, they talked about the fixed income market becoming more digitalized in the coming years compared to equity trading, which is already very heavily digitized.
Fixed income is actually where I started, working in the trading department of a fixed income distressed debt company. Everything is much less digitalized there. Everything is decided by phone calls: discussing the spread between the buying and selling price, instead of something more digitally oriented.
There is a huge opportunity for CDS markets to move from face-to-face phone conversations to a more digital infrastructure, similar to bond markets. It also discusses how volatility in energy prices and interest rates can drive key products such as Brent crude, which, as we mentioned, are key benchmarks on the exchanges they govern.
And as interest or volatility increases in these two key aspects of the economy— energy and interest rates —this could help ensure that returns grow at the teenage interest rate level. Personally, I want to look deeper into ICE after this video, given the founder's leadership and trading with a profit multiplier in the ten to twenty range.
What companies are you attracted to when you look at these insiders, seeing that he's investing billions of dollars of capital? I think what often stops me is that I look and think, “Oh, I understand why he’s buying, but the valuation is not yet attractive enough that, for example, if the ratio drops from 20 to 16 or 15, you really get a potential return of around ten to twenty percent, because at 15 that’s equivalent to a return of around 7%.
” "And if we manage to get growth of 5% or 10%, then we are already talking about an increase in internal value of 12-17% per year." And that sounds much more interesting. Subscribers to Unrivaled Investing know that usually when I can calculate a scenario like this where even in the pessimistic case I get a high single-digit return, I say to myself, "Okay, this is getting pretty interesting." That's when I want to start investing more capital.
I hope this video was helpful to you . Thank you very much for reviewing Unrivaled Investing.
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