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Bill Ackman’s Pershing Square holdings snapped up a huge stake in Warren Buffett’s Berkshire Hathaway (BRK-B), according to a 13-F regulatory filing.
As of the second quarter ended June 30, Pershing Square owned 3.51 million shares of Berkshire Hathaway’s B shares, a position that would be worth $686 million based on Wednesday’s close.
The new position represents 12% of Pershing Square’s net asset value (NAV), Ackman said in a letter earlier this month before disclosing the name of the stock. The stake in Berkshire Hathaway is not an activist position.
At the 13-D Active-Passive Investor Summit in April, Ackman attributed his major turnaround in performance this year to Buffett. Pershing Square has gained 47.6% year-to-date through August 6, far outpacing the S&P 500 and the average hedge fund’s 8% gain, according to HFRI’s index.
At the conference, Ackman said "one of the most instructive things" from his career has been reading the legendary investor’s letters from the Buffett Partnership, the fund Buffett ran before Berkshire Hathaway, and became a world-class authority on making money.
In May 1969, after several years of outperformance, Buffett told his investors that he would close the partnership, pointing to an investing environment that had become "more negative and frustrating."
In the letter, he offered the partners the option to take their cash out, or keep their investment for shares in the textile company Berkshire Hathaway.
"A bunch of people wanted cash and spent another 50 years seeing their therapists for one of the dumber decisions that they made," Ackman told the crowd.
He added that it was "a pretty interesting decision" for Buffett to transition from managing a hedge fund to running a publicly-traded company.
"And he's done quite well, obviously. Since 1969, Berkshire is one of the greatest investments of all time," Ackman said.
"I think it's instructive. And, I think what Mr. Buffett realized in 1969 is that being a longterm investor with short-dated capital is just ultimately going to lead to a bad outcome at some point in time,” the hedge fund manager said.
‘Rough patch’
Ackman explained that like Buffett, the mission at Pershing Square is to have a permanent capital structure. He said they took a step at that direction, launching a publicly-traded fund in 2014 with the long-term plan to have a majority of capital in that vehicle.
He attributed a string of poor performance at Pershing Square to a couple of bad investments. Those mistakes that led to significant investor redemptions, or what Ackman calls a "rough patch."