Step by Step Bill Ackman's Investing Process

The Legendary fund managers playbook on how he has grown his fund into to an 18 billion powerhouse.

Who is Bill Ackman?

Bill Ackman is one of the most prominent figures in finance and the founder and CEO of Pershing Square Capital Management.

Ackman founded hedge fund ‘Pershing Square’ in 2004 and has grown the fund’s assets under management from $500 million to well over $18 billion over the course of the last two decades.

pershing square capital management performance vs S&P 500

Source: Pershing Square Capital Management

But we’re not here to simply admire Bill Ackman’s success. We’re here to reveal Bill Ackman’s strategies and show how you can apply it to your investing strategy.

We’ve spent countless hours studying Ackman and the strategies he’s employed over the years.

Bill Ackman’s Investment Strategy

Ackman calls his process for investing a “big research project”, and we’ve broken his research project down step-by-step:

1. Finding a Business with a Moat.

Ackman describes a moat as “high-quality businesses with a long-term trajectory of growth, that generate lots of cash, can be easily understood, have huge barriers to entry, and don’t have to raise capital constantly.”

Ackman’s reasoning is simple. If you believe the value of any financial instrument is the present value of the future cash flows, you need to know the future cash flows. And if you don’t, well then you don’t know what it’s worth.

After passing this step, Ackman looks to see where the stock is trading. If there is a wide gap between the price and value of the stock, then Ackman takes “a hard look to try and understand why it trades at a deep discount.”

2. Deep-dive into Research.

This phase starts with public data - things like SEC filings and the company’s investor relations page. Reading through forms such as quarterly reports (10-Q’s), annual reports (10-K’s), proxy statements, and even conference call transcripts.

However, the intention isn’t to evaluate the company’s financials. Typically, by this point, Ackman already knows if the company is in a strong financial position.

Ackman looks through the various forms to see if the management of the company is performing.

Ackman says it’s “very helpful to go back five years and learn the story.” This help him determine how competent and truthful the management is. He does this by looking through historical filings and seeing how management describes their business and what they say they are going to do. He then progresses through the years to see if the company’s management lived up to these statements.

3. Evaluate the Risks

Here, Ackman is trying to understand the ins-and-outs of the industry.

If its an industry Ackman’s fund doesn’t know too well, they talk to industry experts, listen to podcasts and interviews from CEOs in the industry, read books about the industry, and look at competitors.

The main question Ackman is trying to answer during this phase is “what could dislodge this company?”


Bill Ackman is an activist investor. Ackman looks for situations where a great business has made a big mistake or lost its way but remains recoverable. He then buys a stake from the existing disappointed shareholders of the firm who’ve lost confidence and are selling at a low price relative to what the company is worth if fixed. Ackman then works with management to help ‘fix’ the company.

Join the conversation

or to participate.