market folly

Pershing Square Capital founder Bill Ackman appeared on CNBC and gave his thoughts on a myriad of topics including McDonald's (MCD), Amazon.com (AMZN), Borders (BGPIQ), and the economy.


On the Fast Food Business

Ackman says that he likes the fast food business after talking about McDonald's (MCD) same store sales. He's been a big shareholder in the industry in the past, owning both Wendy's (WEN) and MCD though he doesn't own any stakes now.

He likes businesses where you can charge a royalty on other people's sales (i.e. MCD collects 4% of the gross revenues of 33,000 stores and another 8-9% in rent).

On Booksellers

The hedge fund manager also commented on what he calls his "worst investment ever": Borders. He highlights the obvious how Amazon.com (AMZN) has taken so much share from brick and mortar bookstores. He thinks it's important for there to be competition for AMZN.

On J.C. Penney

Ackman is on the board of J.C. Penney (JCP) and commented how the company has rolled out a new brand, new pricing strategy, and new store layout as new CEO Ron Johnson (formerly of Apple) puts his 5 year plan into effect. Ackman said that he will be very patient with this investment as it takes time for the turnaround to take hold.

On the Economy

His differentiated view is that "there's a decent chance we massively outperform expectations."

He likes that the effective cost for owning a home is the lowest ever (due to housing prices and interest rates being so low). Ackman attributes the one reason that more people haven't bought homes to the fact that they're afraid of losing their jobs. So employment levels stabilizing would obviously help there.

Ackman also agreed with Warren Buffett's recent comments that buying homes and renting them out, despite being "cumbersome," could be a good play if you have the time and money. He argues you could achieve 9-11% yields in some markets by doing so.

On Lowe's (LOW)

He mentioned he owned Lowe's (LOW) in the past as a potential housing recovery play but sold it as shares rapidly appreciated. He used the cash from this passive investment to buy shares in his activist investment in Canadian Pacific (see Pershing's presentation on CP).

Embedded below is the video of Bill Ackman's interview (email readers click to come view it):



You can view Bill Ackman's portfolio in the brand new issue of our Hedge Fund Wisdom newsletter.