Hedge fund manager Bill Ackman is one of more controversial figures on Wall Street. The head of the $12 billion Pershing Square Capital Management fund has gained the ire of several peers, including Carl Icahn and Dan Loeb, and was even called "despicable" by Starbucks CEO Howard Schultz. Ackman also took Warren Buffett to task last fall for his support of Coca-Cola, saying that the company does enormous societal damage, in response to Charlie Munger, Buffett's right-hand man, attacking one of Ackman's investments. Pershing Square's portfolio, which has included stocks like Oreo maker Mondelez and Burger King parent Restaurant Brands International, can hardly be called purely healthy or socially responsible.
Though Pershing Square was the best-performing large hedge fund in 2014, according to Bloomberg, the fund has come off the rails since then. It fell 20.5% last year and is down a whopping 25.2% as of March 22 of this year. Let's take a look below at three of Ackman's biggest blow-ups.
1. Valeant Pharmaceuticals (NYSE:BHC)
Lately, Ackman has been in the news due to his troubled investment in Valeant, which is now his worst investment ever. Ackman began buying Valeant in the beginning of 2015, and bought 19.5 million shares in the first quarter last year when the price fluctuated between $142 and $205. Marketwatch estimates his current stake was purchased at a weighted average of $171.
Today, Valeant is racked by an accounting scandal and congressional accusations of excessive price increases, and trades at just $27. Ackman has lost about $2 billion, but continues to defend his investment, saying that the company is sitting on valuable assets.
On Wednesday, Valeant's shares tumbled again when it asked creditors for more time to file its annual report as it hopes to avoid defaulting on its $30 billion debt.
2. J.C. Penney (NYSE:JCP)
The man most responsible for J.C. Penney's collapse circa 2012 is Ron Johnson, the Apple retail chief who was brought on to rejuvenate the aging department store chain in 2011. But Bill Ackman is probably the second-most responsible. The activist investor pushed Penney's board to install Johnson after acquiring a $900 million stake in the company in 2010 and gaining a seat on the board. He helped design Johnson's strategy at Penney, which included jettisoning the discounts and private brands that had become the core reason for many of Penney's customers to shop there. The results were a disaster. J.C. Penney's same-store sales fell by an incredible 25% in 2012, and Johnson was ushered out the following April as the board brought in the former boss, Mike Ullman, as interim CEO.
After writing a letter to the board that August accusing them of dragging their feet on finding a permanent CEO, Ackman exited his bet and stepped down from the board. The stock had fallen about 50% under Johnson's tenure, and Ackman lost about $500 million, closing out his investment at around $13/share.
Penney's stock continued to fall further, but has rebounded lately, trading around $11 today.
3. Herbalife (NYSE:HLF)
Ackman's crusade against nutritional product seller Herbalife has been his most dramatic. The hedge fund billionaire has accused the multil-level marketer of being an illegal pyramid scheme that makes money by requiring its vendors to buy into the system, rather than selling actual products. Ackman persuaded Congress to investigate the company, though Herbalife was cleared of fraud last month as investigators failed to find sufficient evidence of criminal wrongdoing.
Ackman shorted the stock in 2012 when it was trading at $47, revealing in a three-hour presentation that he was betting $1 billion on its downfall. Since then, he has spent millions on legal fees and other expenses to levy his claims against the company and lobby against it, comparing it to the mafia and drug dealers at times.
In a single session in February, Herbalife shares shot up 27% after it said it was in talks with the Federal Trade Commission to potentially resolve an investigation opened in 2014. Ackman still believes the stock will go to zero, but he would only break even at around $31 or $32, due to the money he spent making his case. Today, the stock trades around $61, meaning he is about $600 million in the hole. Considering the government's recent findings, it seems likely that shares will move higher.
Jeremy Bowman owns shares of AAPL. The Motley Fool owns shares of and recommends AAPL, SBUX, and VRX. The Motley Fool recommends KO. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.