SALT Spotlight: Ackman Explains His Valeant 'Mistake'

Source: Barron's

Friday, May 19, 2017 |


By now, we all know that Pershing Square's William Ackman made a big mistake with Valeant Pharmaceuticals International (VRX), which he bought near its highs, and recently sold. Today, at the SALT Conference, Ackman explained how he made that mistake. Ackman said his biggest mistake with Valeant was going outside what had always worked for Pershing. That core strategy, as he explained it, is to buy good companies when they are weak, and helping to turn them around, with Chipotle Mexican Grill (CMG) serving as a good example. With Valeant, he bought the company when it was near its highs because he believed in the management. But that management made a huge mistake with its Salix purchase, but instead of just exiting the stock, Ackman said he decided to stick with it, even as it reduced guidance. Then he treated it like he does an activist investment, taking a seat on the board and bringing in a new CEO. But business continued to deteriorate, and every time the stock fell it appeared to confirm the worst. Finally, he sold the position.

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