Bill Ackman - The Next Warren Buffett | Full Documentary

bell ackman just launched an attack on verbal life by selling short of one billion dollars of the company's stocks betting on its ultimate demise all pyramid schemes will ultimately collapse the only people who make money are those few who are at the top of the pyramid see there's herbalife stock down 14.6 percent this is not the first time ackman attacked the company in a public way he represents the activist investors ones with ruthless ambition to battle corporate america and to make billions [Music] phineas from an early age ackman shows a strong entrepreneurial streak running a cart waxing business to make his own money ackman was always a confident and ambitious young man some even consider him to be arrogant it has to do with the fact that he was born in a very wealthy family beginning in the early 1920s ecmas grandfather built a private real estate business by the time ackman was born his father larry ackman has taken the family's business to a higher level making millions of dollars a year i certainly live in a home where you learn never to give up on pretty much anything mom and dad you know hard-working motivated educated people high ambitions for their kids always talked about setting an example i learned a lot of things from my parents after earning a near perfect sct score ackman is accepted to harvard like all young men growing up in a successful family ackman's father expects his children to one day take over the company after graduation ekman spent two years working for his dad but deep down he wants to create his own business empire one that will trump his fathers the problem is he doesn't know what business to start until he meets the most prominent investor in america warren buffett is the most celebrated investor in the world in his long career he turned a near bankrupt company berkshire hathaway into a 700 billion dollars behemoth with the help of his family's connections bill ackman gets to meet warren buffett in person i do think buffett is the greatest investor and the reason why i believe that is you know just that this is a 50-odd year it's a 60-year track record of compounding at 20 plus percent with a very modest amount of leverage you know in the form of principally insurance float and i just don't think there's a record that compares ackman has found his true calling becoming the next warren buffett the 1990s was a turbulent decade after suffering a recession for the black monday crash the us economy was slow to recover but the stagnation gave rise to a thriving industry the hedge funds operated by opportunistic investors hedge funds made profits when others couldn't inspired by warren buffett bill ackman is ready to build his own berkshire hathaway using his 40 000 savings he starts looking for his first big idea it will come from unusual place i have an old-fashioned belief that i can only should expect to make money and things that i understand and when i say understand i don't mean to understand you know what the product does or anything like that i mean understand what the economics of the business are likely to look at look like 10 years from now or 20 years from now one of eggman's first investments came from an area where he understands better than most people real estates alexander's is a real estate investment trust that owns many retail department stores in new york after donald trump took a 20 stake in the company and started losing money and its well-known mural have been fixtures on route 4 in paramus for 30 years but some say the loan department store no longer could keep up by 1992 the prospect of bankruptcy was looming its shares were trading at eight dollars each ackman knows the company is worth much more he realized that even if the company goes under and their properties get sold in the market they will still be worth a lot ekman bought stocks of the company at a bottom price the investment was a success after the company merged from bankruptcy the stock price started to shoot up agmen sold it for 21 this year almost tripling his original investment after beating the market multiple times ekman is ready to start his own hedge fund [Music] and then i was doing this alone in my dorm room and i've recruited a classmate a guy named dave berkowitz to be part of this two-person wasn't even an investment club at the time and we had fun kind of looking at ideas together and i said look imagine if you could do this and people would pay us to do this and that was the genesis for starting a hedge fund which i did in 1992 called gotham partners leveraging his wealthy network ackman raised 3.2 million dollars for his hedge fund gotham partners started aggressively investing in undervalued stocks generating 20 return in his first year bill eckman then used that track record to raise another 10 million dollars for his fund we can see that from the very beginning ackman was very talented at rallying people for their support whether it is raising money or getting shareholders votes looking at his mentor for inspiration ackman realized he could be an activist investor like the early days of warren buffett and buffett started out managing really an activist hedge fund if you follow him from the 1950s to the late 1960s he managed a what best described as an activist hedge fund there's a reason why activism makes sense in certain cases at some companies the managers kind of forget who they're really working for and it becomes their own play pen and at other managements they're sometimes incompetent not we're not saying often and you know it's the job of a board when that occurs to do something about it and sometimes they don't to become an activist investor ecman would take a large position in a company to advocate change in order to raise the stock price it doesn't take long until an investment opportunity shows up [Music] sitting at the heart of new york the iconic rockefeller center is a large complex consisting of 19 commercial buildings covering 22 acres but by early 90s the real estate market fell apart and in 1990 the whole country it just went very very bad the stock price of rockefeller properties collapsed and the reit was under a lot of financial stress due to its high debt while the company is going through bankruptcy ackman purchases as many shares as he can as an expert in real estate ackman knows the reit is being significantly undervalued he partnered up with the business magnate joseph steinberg together they purchased seven percent of the company and start an attempt to take over eggman's takeover attempt draws a lot of attention for real estate tycoons like sam zell and even david rockefeller himself but ackman was outbidded by forming a partnership with goldman sachs david rockefeller amassed control of the real estate trust although ackman didn't win control in the end his investment paid off the rockefeller play helped gotham finish 1995 with a 39 return everyone was so blown away by this young man who was barely in his 30s although he didn't take over the company he earned the respect of the wall street heavyweights and they became his investors by the late 1990s the hedge funds boomed attracting thousands of vicious young men to the industry bill ackman grew up in a successful family but defying his birthright ackman wants to build his own business empire by age 30 eggman's hedge fund gotham partners quickly grew to worth 500 million dollars he is now the master of the universe but he's too blinded by success to see his downfall gotham golf is a real estate group that controlled two dozen golf courses around the country ackman invested heavily in gotham golf believing that his properties would keep surging in value he was wrong as the real estate value kept declining instead of cutting losses eggman doubles down like buffett and monger if he sees an undervalued asset he makes a very large and concentrated bet diversification is as practice generally makes very little sense for anyone that knows what they're doing diversification is a protection against ignorance i mean if you want to make sure that nothing bad happens to you relative to the market you own everything there's nothing wrong with that i mean that as a perfectly sound approach for somebody who who does not feel they know how to analyze businesses but eggman fails to realize that his hedge fund is not berkshire hathaway and monger can do really long term and concentrated investment that is because their company is not set up as hedge fund one of the great advantages that warren buffett has is he manages a public company doesn't have to worry about investors redeeming their capital the problem with hedge funds is that your money can leave typically every quarter and it's hard to be a long-term investor when your investors can take the running back when akman keeps losing money with gotham golf his investors want out not willing to liquidate his positions ackman tries to raise more money but when that is not nearly enough ackman is forced to come up with a more creative way to save his fund are you happy with your job you're looking to raise your standards raise the quality of your lifestyle and then prepay legal services is an incredible vehicle acme solution comes from a bizarre company prepaid legal service was a multi-level marketing company that sold legal services today it was known as a legal shield the company was heavily shorted on wall street with skeptics charging that pre-paid service was actually a worthless pyramid scheme but akman believed the company was undervalued and built a large position in the company but the stock price was slow to move up and ackman lost his patience to pop up the share price ackman released a public letter on his website boasting how great the company is [Music] it worked the stock price started to rise giving eggman some breathing room but his headache is far from over driven by subprime loans early 2000 was the start of a real estate boom ackman saw a rising level of financial scams and frauds indicating a financial bubble is brewing after investigating a financial company mbia ekman bat the company to fail using credit default swaps although his investment thesis on nbia turned out to be correct his timing was wrong mbi is sue ackman for market manipulation over his prepaid legal service investment legal trouble caused more of his investors to flee desperate ackman decides to make a deal with the most dangerous man on wall street his name is carl [Music] icahn carl aigan is a notorious corporate raider grew up poor in bayside queens karakon joined the booming stock market in the 1960s through decades of corporate battles car icon became the undisputed king of takeovers i own it it's my money i worry about the bottom line because if i lose you know i'm answerable to my bank account car icon was a really tough guy to work with to make a deal with icon it goes to show how desperate bill ackman really was as more investors want their money back ackman is forced to liquidate his stocks even the ones that have huge potential hotwood realty was another reed whose shares were trading at 60 dollars but he thinks the company is worth 140 dollars and it would be a bad idea to dump his holdings in the market he caught up carl icahn icon sees the company to be undervalued as well and is willing to buy eggman shares at 80 20 more than a market price car icon has been investing much longer than bill ackman he knows a bargain when he sees it he also knows that this company is perfect for hostile takeover after acquiring the sheriff and ackman karaike immediately starts a proxy fight to gain control over the company the management i hope would relative fears what icon would do to them if they wins control instead they found a white knight to buy the company car icon shares were acquired for 137 dollars making a stunning 72 percent profit car icon really lived up to his reputation win or lose he always makes more money but now ackman wants a piece of that profit what car icon failed to realize ackman added a clause in the original agreement that if icon makes a profit out of haltwood over 10 percent ackman is entitled to half of it carl icahn has built a career out of fear and intimidation he refuses to pay ackman and threatens to sue him but ackman is not easily scared he sues i come back in the end the court favored ackman and order carl icahn to pay him 9 million dollars when you're talking about people at the top top top top top their competitiveness is rooted in ego to build a new car icon nine million dollars may seem like a pocket change but if there is one thing icon hates the most it is losing and he will get his revenge what ackman failed to learn from buffett is the rule of never lose your money rule number one never lose money rule number two never forget rule number one the last two years have been one of the most unusual times in financial history to protect your money one must find alternative investments that are uncorrelated to the market one such a market is art after all the ultra wealthy people like the hedge fund billionaires i cover put a lot of their personal money in arts from 1995 investing in top contemporary arts have outpaced s p 500 by 174 percent which is 14 per year on average masterworks io the newest 1 billion startup makes it possible for people to invest in multi-million dollar paintings at a fraction of the price your choirs are ranging from 1 to 20 million dollars in value and securitize it through the sec on their platform anyone can invest in those paintings via fractionalized shares just like buying shares in a company and when it comes to returns they were best in class returning 32 net of fees to their investors from the sale of their banksy painting as a special bonus i'm giving you a priority access to invest in this asset class that outpaces gold real estate and stocks their platform typically has a wait list but if you use the unique link in the description you can skip that wait list and have access to their current offerings today after the collabs of gotham partners ackman is wasting no time launching his new fund he raised 50 million dollars to start pershing square capital management eggman now only focuses on activist investing in more liquid public companies you know normally we look for a great business that had lost its way we try to figure out what they had done wrong and then we'd recommend a series of changes after buying a stake in the company that's sort of our core business the essence of acme strategy is the same he looks for companies with a lot of real estate because they're more tangible and have more predictable cash flows and not surprisingly he buys a lot of restaurants and retail stores wendy's didn't start the chicken wars they just ended them in july 2005 pershing square took a 9.9 stake in wendy's he then launched a campaign to get the company to spin off the tam horton's donor chang just a few weeks afterwards wendy's agreed to spin off the news caused the company shareprint to rise to 50 dollars while eggman bought them barely at 30. you know eggman is very loud and public about his investment it works because this windy success got him a lot of investors with this one trade he pretty much resurrected himself after wendy's investment akma made another 100 profits with mcdonald's by 2010 akmas pershing square has become a rising star on wall street with 10 billion assets under management his concentrated investment approach seems to have worked i think what's unusual about us is we're very concentrated we own 10 investments you know a lot of people talk about being concentrated they might have 30 40 50 investments you know their top five are big but we literally own ten things ackman may be right but he fails to see his investment style will soon get him in trouble again he is the largest shareholder in jcp with a whopping 18 in the past he lost 32 million bucks and after hours on the stock reactions to ron johnson's moving out jc penney is a declining department store chain with 689 locations in the united states after taking almost one billion dollar stake in the company ackman fired the ceo and hired a new one from apple ron johnson johnson went on to implement many drastic changes that turn out to be disastrous hedge fund manager and activist shareholder william ackman resigns from the board of jcpenney after a lengthy period in which he forced his own disruptive shake-ups on the companies ackman lost half of his investment in jcpenney to reverse his fortune ackman is again desperately trying to find the next big idea [Music] if you follow what i say write this down you're going to make a minimum of 50 000 this year that's the that's the least amount of money that you're going to make the second year you'll make 125 000 and that's the least amount of money that you're gonna make mark renault hughes started herbalife at the age of 24 out of the back of his car over the next 20 years hughes builds herbalife to a business powerhouse with 1.8 billion dollar sales a year but then at the height of his career he dies from drug overdose at the time herbalife had a very sketchy sales practice with the death of the founder they're looking for a new ceo and they're also looking to rebrand themselves to look more legitimate then they found the perfect man for the job before herbalife mike johnson was an acclaimed marketing executive during his 17 years working for disney he brought in over 1 billion dollars in revenue for his department with johnson in charge herbalife started to rebrand itself to be more illegitimate i don't think the herbalife today is the herbalife of what it was years ago and i know that michael johnson has tried to clean up the business a bit so that it's not entirely based on recruiting to make up for his jc painting blunder bill ackman needs to find his next big investment in the case of herbalife i'm not a shareholder pushing uh to make a business more valuable i'm an investor who's made a bet that the business will fail we're short the stock and what we are doing is we believe that herbalife is operating a pyramid scheme we believe that they're transferring wealth from a very large number of low-income principally hispanic individuals in this country and around the around the globe to a handful of wealthy people knowing bill ackman is not going to do it in a quiet way he will publicly execute the company [Music] forty to fifty percent of the revenues of the company come from a business business method called a nutrition club which itself is entirely fraudulent um they've got fake customers these are not customers these are people who are buying into a mini pyramid scheme all right there's nothing circumstantial about it we have facts our cfo called mr ackman this morning and asked him to participate mr ekman said no then he refused now we know what this has been going on for in the shadows as we say for the last eight months this has been ridiculous what's happening here we're not a pyramid scheme that's a bogus accusation herbalife immediately starts a puppet campaign to fight back but it does little to boost the shattered confidence of investors driving his stock price to a new 52-week low just when all hope is lost mike johnson gets an unexpected visit from another hedge fund manager his name is dan lope dan loeb an opportunistic capitalist made his fortune as an activist investor like ackman today his hedge fund third point has 15 billion dollars assets under management load was also a famous short seller but he sees herbalife as an opportunity to profit by triggering a short squeeze [Music] loeb is of the same you know generational age is ackman another sort of smart and handsome guy who gets a lot of press and for good reasons his performance has been fantastic he runs third point llc he emerges he comes out of the blue with a big position long herbalife so he was in favor of a verbal life and that really shook ackman then lobe used to be ackman's friend now he's trying to screw him over it goes to show that there are no real friends on wall street the portrayal of lope cost ackman tens and millions but this is just a start eggman's herbalife short makes him vulnerable and his enemy knows it through years of boardroom battles car icon has garnered an astonishing fortune by 2014 karakan was worth 25 billion dollars car icon doesn't answer to anyone he trades his own money he can go to distance to force his opponent into submission after losing 9 million dollars to ackman in 2010 icon has been waiting for an opportunity to hurt him back he sees herbalife short as the perfect opportunity to enact revenge on bill ackman wasting note tying icon starts building a large position on herbalife i think herbalife is a great company it makes great product with the support of mike johnson icon acquired two seats at herbalife's board they then bring on the former u.s surgeon general dr richard carmona to the board further strengthening the company's legitimacy the sheer price soared 100 percent as a result to akmin this is nothing short of a declaration of war and i'm telling you he's like the crybaby in the schoolyard you know i went to a tough school in queens and they used to beat up the little jewish boys and he was like one of these little jewish boys crying that the world was taking advantage of him bill ackman was underestimated before he's not going down without a fight agma's first defense was to replace half as short positions with put options put option is nothing more than an insurance contract on the value of a stock at the same time bill ackman doubles down on his effort to lobby the government to shut down herbalife ftc and fbi opened investigation on herbalife which slashed the company's stock price by 14 but in a shocking turn ftc didn't find herbalife to be a pyramid scheme it's a case of good news bad news for embattled company herbalife the federal trade commission will not classify it as a pyramid scheme but in return herbalife will pay a settlement of 200 million dollars it is time for ackman to wind down his positions but then he receives a phone call for none other than his nemesis carl icahn after the ftc verdict car icon was looking to exit his positions at herbalife but he can just dump his shares in the market which will cause a panic he's looking to sell half of his cheers to someone who's willing to buy and that someone is bill ackman but that was a mistake bill ackman used this chance to get revenge on icon for what he did to him he leaks the information to the press immediately causing a panic in the market the battle of the wall street billionaires gets another twist carl icahn recently discussed selling his whole stake in nutritional foods company herbal life to his arch nemesis william ackman among others to calm the market car icon was forced to buy more herbalife once again two billionaires are at a standstill but to bill ackman herbalife is the least of his concern for now his real trouble has just begun [Music] by the 21st century with the emergence of large etfs american companies have become complacent as their biggest shareholders tend to be passive funds this gives rise to the activist hedge funds who rally those colossal etfs to be more active leading the charge is bill ackman who through his high profile campaigns has changed the way many companies operate in doing so he's made billions after shorting herbalife he found himself locked in a battle with the most formidable investor on wall street carl icahn the emergence of icon cost ackman hundreds of millions while the herbalife battles continues on ackman finds himself in another fight except this time it may be the innocent [Applause] valiant's for bear were or kind of its origin was a company called bioville which is a corporate clogged toilet based in in canada we've got a merger in the medicine business in 2010 there was a sort of a merger of equals with valiant pharmaceutical valiant planted a foreign flag to save money as a way to skip paying taxes stateside and a guy named mike pearson took over the remaining company our job is to create shareholder value and um so people shouldn't be afraid of of anything that happens that helps them create shareholder value that's that's our job bill ackman believes valiant to be the next berkshire hathaway its growth strategy is not driven by new products but by acquiring other companies except warren buffett's berkshire hathaway is not a pharmaceutical company it is insurance company whose business model is about collecting people's money based on future promises i mean this is a company that buys drugs as we know it hikes prices even though they claim that's not a big part of their strategy we believe it is i think that that whole model of not spending on r d and purchasing drugs gave the company a pass that now they're maybe not getting pharmacy facing a backlash from accusations about its relationship with high-flying drug maker valiant pharmaceuticals shutting its doors closing philidor is the name it announced you know what we have to wind down our principal operations done closed goodbye agmen's world is tumbling down [Music] why would you not recommend to the board that you know over a 30 increase for one year i would think that's that's a pretty good return rate um why don't you charge 3 000 for that look at something we'll discuss tomorrow you will discuss dropping the price of isopropyl to 3 000 because that's over 30 percent increase in the original price so we will absolutely discuss okay the failure of valiant is a devastating blow to bill ackman to make matters worse herbalife stocks stabilized and are slowly recovering eggman's perching square starts facing redemptions again [Music] always have the view that how successful you are is really a function of how you deal with failure and if you deal with failure well and you persist you know you have a high probability of being successful so i've always kind of had that view and then i've had to apply it to myself you know certainly a few times and i always like to say that experience is making mistakes and learning from them and i've had the benefit of having made a lot of mistakes ackman learned from his previous hedge fund that redemptions can be very scary that's why he went public in london exchange this time he's not going down by 2019 after breaking even for nearly three years his fund made 57 return agma's pershing square is making a comeback but his resurgence will be challenged by the most unexpected crisis of mankind [Music] eggman has learned from his past mistakes that one should always have insurance against the worst case scenario by the beginning of march 2020 ackman plays a hedge using credit default swaps then he went on tv to warn the public hell is coming okay and i i felt you know it's really i've never had this experience before in my life the closest i had was the financial crisis where i'm saying you know things are coming bad stuff's coming um but this was a feeling like i've never had like there's a tsunami coming right the tsunami's coming in you feel it in the air as kovac gets worse in america the market begins to fall and all this has rocked financial markets around the world the worst sell-off on wall street since the financial crisis in 2008. in a few months time ecmas hedge generated over 2 billion profit [Music] after closing the short positions on herbalife ackman has decided to never go short on another company we're generally long only in terms of we own things we don't short stocks we did a couple times famously in the past but but not going forward he has gone back to a circle of confidence companies with large real estate presence at the same time car icon has exited his positions with herbalife eating a decade-long beef with ackman [Music] [Music] [Music] 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Length: 34min 5sec (2045 seconds)

Published: Wed Oct 20 2021