Bill Ackman on the Right Time to Buy the Dip

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01. When a stock's down roughly 25% and the stock market's gone up dramatically, um, at what point do you decide, I'm going to buy more or at what point do you decide, I'm cutting my losses. This is just the wrong direction. It has nothing to do with the stock price for us. It has to do with what's going on in the business.

02. Uh, you know, in J. Penney case, we're on the board. We're working uh hard uh along with the other directors and you make sure that this ship is steered uh is steered correctly. Um you know as a general rule uh you know we if we conclude that we're wrong or we've learned new you know investing is about the best investments are the ones where we are the confident we're right and everyone else is wrong.

03. Okay. And you have to in order to be, you know, been accused recently of being arrogant among other things. No, no, I'm going to actually ask you that. It was called, it was pompous, but that's okay. Pompous? I I don't think I'm pompous, but I've been certainly been accused of being arrogant. And there's a difference between arrogance and confidence.

04. Yeah. If you're arrogant in investing, you're going to get killed. Right. If you're not confident, you'll never make an investment. Right? So, you have to do a sufficient amount of work to be confident enough to have the conviction do something that's contrarian. Right? We bought the stock of a uh of a soon to be bankrupt retailer, oh sorry, a shopping mall company during the financial crisis uh at pennies per share.

05. You have to be willing to look silly when you do something like that. Um general growth stocks up 90fold since our original investment. Um you know on that's we had confidence. Maybe people thought it was arrogant to believe that we could be successful in turning it around. Uh, but you also have to be humble and you have to recognize when there are new facts you hadn't considered that are inconsistent with your thesis.

06. Well, if you look at Herbal Life, none of the the bull case for Herbal Life, none of those arguments have in our view any merit. Um, and and therefore we're we continue to have conviction. But if we were to learn a new fact that all of a sudden we realized Urbal Life was a great company and was wasn't a pyramid scheme and the products were really had tremendous efficacy and they were priced correctly and there was real demand for them, you know, we would change our mind.

07. So, I'm pretty sure I may be mistaken that your entire portfolio is US except for Canadian Pacific Railway, which may have been your best performer uh last quarter. Um, why is this your only non US play? And do you think actually this may be a trend where you're starting to look um outside of the US?

08. So we do very few things. In fact, we do very few things a year, right? If our average holding period is four or five years for our kind of active uh investments and we have 10 stocks, right? We need to find a couple of ideas a year. It doesn't make sense to me unless the universe we play in we've run out of targets.

09. You know, why go why fly to Europe to have a meeting with management? why, you know, deal with a jurisdiction where we're less wellknown, where we have fewer relationships, we don't understand the legal system, the regulatory environment. So, we focus on the United States and Canada and we've invested in Canada uh before u because we, you know, we understand the language, we understand the law.

10. It's close to home. It's a short flight to uh and Calgary is an extra few hours, but uh you know, just close to home. I can go see my kids. You like to feel and touch it. Yeah. Yeah. It's very important. Yeah. Um, so what has been your single biggest mistake you've made either investing in a company or deciding to walk away from investing?

11. You know, we uh spent an enormous amount of time looking at Mastercard before it went public. Uh, and I've always believed that, you know, I'd said previously, I was asked by, you know, at a business school by a student, what's the single best business in the world? And I said, "If you could own a royalty on people spending money like Visa, Mastercard, the greatest business in the world, if that ever became a public company, you want to buy that company or if you ever could buy that company." Well, it became a public company and we did an enormous amount of work in the company.

12. We couldn't get comfortable with the regulatory risk uh you know, consumer protection agency things. No, there was a there was outstanding uh kind of um kind of antitrust litigation relating to kind of monopolistic practices of of the uh of the uh Visa Mastercard. And you know when you have a strategy where you put 10 15 plus% of your assets in any one investment, you can't take even a very small risk of a catastrophic outcome.

13. Oh, interesting. And so we passed on Mastercard and it's been a an incredible investment management's done an amazing job. That's a that was that's a big miss. Yeah. On a well it's either that that the question is whether it's a miss uh did we did we overestimate the regulatory risk or or did it just work out in a reason way.

14. So I think as a as part of a you know 50 stock portfolio we would have bought it as part of a 10 stock portfolio. We couldn't do it. unclear to me, but I still look at that one and say, "Do we really have a miss there?