market folly

We had previously covered a brief summary of Bill Ackman's thoughts at the Ira Sohn Investment Conference and now we'll take an in-depth look at the Pershing Square hedge fund manager's thoughts. Below is his full presentation encompassing topics of how to save the ratings agencies, his continued bullish stance on General Growth Properties (GGP), a new book he is the subject of, and his brand new purchase of Citigroup (C).

Ackman first critiqued the ratings agencies and laid out a plan on how to 'save' them. He mainly thinks they need to negate conflicts of interest, institute a new payment scheme as well as a new issue ratings moratorium. Ackman feels we need a new system whereby investors are not so overly reliant on ratings and can do their own due diligence. In the end, he believes NRSROs should be removed from the structuring and underwriting process and you can view his full thoughts in the presentation below. You'll recall of course that fellow hedge fund manager David Einhorn of Greenlight Capital is bearish on the sector. In fact, he mentioned in his new Ira Sohn presentation that he was still short the ratings agencies and we've also covered his original thesis from last year, The Curse of the Triple A.

Ackman's next topic revisited an old (and still current) investment. At least year's Ira Sohn Conference, you may remember that Bill Ackman made a presentation on General Growth Properties. Back then, the stock was trading around $1 per share as the mall REIT operator was on the verge of bankruptcy. Ackman's investment turned out to be his most successful ever, but he's not done yet. His new presentation details the plan to save the company from bankruptcy as well as the continued bullish prospects. He cites a bouncing-back US consumer, demand for mall REIT debt and equity capital, increased mall traffic, as well as decreasing cap rates.

Most notably, Ackman delves into General Growth's bankruptcy emergence where the company will become two separate entities: General Growth Properties (GGP) and General Growth Opportunities (GGO) He notes an estimated value of GGP at $15 and an estimated value of GGO at $5. GGP would be considered the cashflow cow as it holds all the income producing assets while GGO holds more non-income producing properties (via real estate development assets). Ackman also makes note that shares of GGP would have to be added back to real estate indices, thus generating natural buyers because when the company entered bankruptcy it was removed from these indices. You'll recall of course that we previously detailed how Ackman thinks GGP could double over the next few years. Hedge fund Pershing Square is definitely still in the bullish camp as we've detailed their large economic exposure to GGP. For the rest of Ackman's investments, head to Pershing Square's equity portfolio.

Rounding out Ackman's presentation, he then casually mentions that people have always accused him of talking his book (who doesn't talk their book these days?) As such, he ties in the suggestion that you buy Christine Richard's new book, Confidence Game: How a Hedge Fund Manager Called Wall Street's Bluff, which he is the subject of. Lastly, Ackman leaves one presentation slide up regarding Pershing Square's brand new purchase of 150 million shares of Citigroup (C) and comically comments that he doesn't have time to talk about this large new addition. Later in the week though, we did manage to determine why Bill Ackman bought Citigroup.

Embedded below is Bill Ackman & hedge fund Pershing Square's full presentation from the Ira Sohn Investment Conference analyzing the ratings agencies, General Growth Properties, and more:



You can download a .pdf copy here.

Given his new Citigroup purchase, we'll probably see an in-depth slide show on that investment at some point in the future from Pershing. Even though General Growth Properties has already been his single most successful investment, Ackman thinks shares are still heading higher. For more on Bill Ackman, head to our profile of Pershing Square. For more hedge fund manager presentations, head to the summary of the Ira Sohn Investment Conference as well as David Einhorn's presentation and Steve Eisman's presentation.