Bill Ackman plowed more than $1 billion into Netflix stock in 4 days, showing his eagerness to pounce during sell-offs
Bill Ackman's Pershing Squarebuilt a billion-dollar Netflixstake in four trading days.
- The investor's hedge fund pounced on
Domino's Pizzastock in a similar fashion last year.
- Ackman has acted quickly during the pandemic, buying and selling
Bill Ackman disclosed a $1.1 billion stake in Netflix on Wednesday, and revealed that his Pershing Square hedge fund built the position in the space of four trading days. The billionaire investor's massive bet on the video-streaming company is the latest example of his pouncing on stock-price weakness, and buying and selling quickly, in the pandemic era.
Ackman began buying Netflix stock when it plunged 25% on Friday, slashing the company's market capitalization to just over half of its level in mid-November.
Pershing Square took a similar approach when Domino's Pizza shares tumbled in March last year. The fund bought 5% of the fast-food chain in a matter of days, securing a stake worth $750 million at the end of that month.
Ackman also capitalized when pandemic fears crashed the stock market in the spring of 2020. Pershing Square had spent $27 million on credit-default swaps as insurance against a wave of corporate defaults, and those hedges had ballooned in value to $2.6 billion. The fund sold them and plowed more than $2 billion of the proceeds into Hilton, Lowe's, and other stocks in its portfolio that had tumbled in value.
The market swiftly rebounded, boosting the value of Pershing's stocks and helping it to deliver a 70% return in 2020.
Pershing Square pursued a somewhat similar strategy for his Netflix wager. It cashed in about $1.2 billion worth of interest-rate hedges to finance the stock purchases, Ackman disclosed in a client letter this week.
Ackman has also been willing to sell stocks to seize buying opportunities. For example, Pershing Square dumped its almost 1% stake in Starbucks to pay for its Domino's Pizza stock last year, as Ackman and his team saw more upside in the pizza business.
Moreover, Pershing Square disposed of roughly $1 billion of shares in
Ackman and his team later explained that they wanted to free up cash, felt Pershing could be more nimble than the Berkshire, and were disappointed that Buffett hadn't deployed a big chunk of his conglomerate's roughly $140 billion cash pile during the pandemic crash.
It's too soon to say whether Ackman's Netflix wager will pay off. Yet it's shown once again that he's ready to deploy billions of dollars at a moment's notice, and won't hesitate to cash in other investments when something catches his eye.
Read more: Warren Buffett is ready to deploy $80 billion if the market crashes this year. 7 experts say the investor should trim his Apple stake, acquire luxury brands, or buy some blue-chip stocks in the meantime.
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