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Bill Ackman, an activist investor and hedge fund manager who runs Pershing Square Capital, is one of the most brilliant money managers to follow over time. In fact, he has made some applaudable bets recently, especially in the wake of the 2020 stock market crash.
As a value investor and one of the many disciples of Warren Buffett (the Oracle of Omaha), Ackman is a great role model for any beginning investor looking to achieve slightly better returns than the market average.
Ackman recently made headlines for his latest stock market bets. In particular, he acquired shares in the Canadian alternative asset manager Brookfield Corporation. (TSX:BN), acquiring a position worth approximately US$285 million. This equates to just under seven million shares purchased in the first quarter alone. This is a huge vote of confidence in a well-run Canadian company, which I have stressed in the past for young TFSA investors looking for the best of both worlds: value and growth.
Ackman bets heavily on the Canadian icon
With Ackman’s stamp of approval on the name, the big question is whether it’s too late to follow the legend and get into the Canadian company at current prices. To be sure, following the gurus in the stock market can be tricky. Not only can you get a much higher entry price (typically, a stock trades higher after news breaks that a big-name investor has initiated a position), but you also may not know how long an investor plans to stay.
Either way, if you're one of the many Canadian investors who already had long positions in stocks, perhaps Ackman's latest bet is reason enough to become even more bullish on a name, especially if a near-term pullback for BN stock and the rest of the TSX index is in the cards between now and the end of the year.
Ackman has a keen eye for value, not only in the US market but in Canada as well.
Ackman is perhaps best known to Canadians for his significant role in Kansas City, Canada (TSX:CP). While Ackman still holds long positions in the rail line that runs through Pershing Square, it is notable that he has been trimming his position lately. In fact, Brookfield Corp. may be the better bet at current levels, especially considering the rail strikes and the premium valuation of CP stock.
Additionally, Brookfield stands out as a company that can benefit over the long term from any period of mild economic stagnation. The company has plenty of cash to invest in opportunities when stocks and the economy inevitably head downward. In some ways, Brookfield is a great way to bet on the long-term future of the economy, regardless of where it is headed in the near term.
In summary
BN stock is currently down about 5% from its recent high after dealing with a correction of over 12% between July and August. While time will tell if there will be a full recovery by the end of the year, I see significant value in the name, even if it comes at a cost basis above $64 per share.
The company has legendary management, very strong cash-generating assets, and now the backing of Ackman. I believe BN stock is worth a more significant premium than it currently commands. With a forward price-to-earnings ratio of 18.6 times, Canadian TFSA investors may want to add to their shares now and in the face of any future weakness.