A long read but worth it. In the past I have written about the danger of combining hubris with concentration bets.
One day in the summer of 2011, Christine Richard arrived at the forty-second floor of a high-rise on Fifty-seventh Street in Manhattan to visit a hedge fund called Pershing Square Capital Management. Richard worked for a boutique research firm that identified “short” opportunities—companies that investors could profitably bet against—and she was there to present an idea to Pershing Square’s founder, William Ackman. On the way over, though, she was caught in a rainstorm, and by the time a receptionist directed her to a conference room she realized that she was dripping wet.
A few minutes past the appointed time, Ackman rushed into the conference room, trailed by an assistant who was listing a series of meetings for that day. Ackman couldn’t stay, so he summoned one of his most trusted analysts, a twenty-eight-year-old red-headed Texan named Shane Dinneen, to sit down with Richard. She placed the rain-spattered report she had prepared on the conference-room table. On the cover was a three-leaf corporate logo. Underneath it was the word “Herbalife.”
Pershing Square is what’s called an “activist” hedge fund. Ackman uses its considerable resources—around eleven billion dollars, raised from wealthy investors, institutions, and employees—to amass major stakes in publicly traded companies. The intention is then to push the companies to improve their businesses, or at least their stock price, which is how an activist investor generally makes money. There are debates over whether activist funds strengthen the companies they invest in or simply force them into taking short-term measures—laying off employees, selling off divisions—to drive up profits and the share price. Ackman, who is sensitive to stereotypes about profiteering, says that Pershing Square has fewer than a dozen investments in its portfolio at a time, and sees them as long-term commitments. He maintains that his firm puts tremendous resources into each one, gives strategic advice over a period of years, and often recruits C.E.O.s and board members.
More here – The New Yorker
Money as always talks.
Nice article. My sister is getting involved in a network marketing company , I don’t have the heart to tell her becareful.
Maybe I should show up and ask how much of their profit is retail and how much is distributers. Probably get thrown out quite quickly. Both of us.