How To Invest Successfully By Bill Ackman
About Bill Ackman
William Albert Ackman is an American investor and hedge fund manager. He is the founder and CEO of Pershing Square Capital Management, a hedge fund management company. His investment approach makes him an activist investor.
Born: 11 May 1966 (age 55 years), New York, United States
Net worth: 3.1 billion USD (2021) Forbes
Keys On How To Invest Successfully.
The most powerful force in the universe is compound interest. Albert Einstein. (1879-1955) He referred to it as one of the greatest “miracles” known to man. Compound interest is interest added to the principal of your investment so that from that moment on, the added interest also earns interest.
The most valuable asset in investing is time. You want to start early so that your money can grow overtime. This is how you take advantage of compound interest.
The key to successful investing is not in startup business, here are keys to guide you in your investment’s plans.
1. Invest in public companies.
2. Understand how the company makes money.
Invest in business you understand. This means you’ve to know how the company makes money.
3. Invest at a reasonable price.
4. Invest in company that could last forever. e.g. Coca-Cola, Mc Donald
5. Find a company with limited debt.
6. Look for high barrier entry – nobody can come up with replica, that means a product that is difficult to come up with. e.g. Coca-Cola, pepsin.
7. Invest in a company that is immune to intrinsic factors.
e.g. Coca-Cola has been here for 120 years plus, we still use it today.
8. Invest in a business with low reinvesting cost.
9. Avoid business with controlling shareholders.
10. Invest in simple predictable free cash flow alternative business with large barrier entry.
For Investing Find A Business That;
- You understand
- Has a record of success
- Makes an attractive profit.
- Can grow overtime
Invest In Businesses That Last. Those are business that;
- Sell product people need.
- Sell a unique product.
- Elicit brand loyalty that consumer are willing to pay.
8 Principles to Successful Investing
Invest in a company/business with;
- Free cash flow generative
- Dominant market position
- Large barriers to entry
- High return on capital
- Invest in Simple and predictable businesses.
- That is limited exposure to non-controllable extrinsic risks
- Strong balance sheet where outside capital is not necessary- companies with strong balance sheet don’t need to access capital to survive.
- Excellent management and good governance- a company managed by a bunch of yoyos can never make any profit. There must be good governance in place for a company to thrive and make profits.
Bill Ackman’s Pershing Square Capital Management company adheres to those principles and anytime they veered from those principles the company get harmed from investment standpoint. How To Invest Successfully is one thing and when to invest is another. So when should you invest
When To Invest
- When you have money you don’t need for 5-10 years.
- After paying off all loans – Because by so doing you have100% guarantee return on your interest rate.
- After you have 6-12 month of money set aside to live in case of emergency.
Bill Ackman is referred to as an activist investor. An activist investor is a shareholder who behaves like an owner.
How Do Activist Investor Invests
When all money goes one way, go the other way- buy stocks from bankrupt companies.
When such companies get on their feet you will make profit 115X from original investment.
Do Your Homework
We like business that we call simple predictable free cash flow generating dominant companies, business with a moat around them and the way we make those decisions is by doing our analysis. We look at company that we can buy at very deep discount to what is worth and if the discount is management issue, or strategy issue, a hidden asset issue, a cost structure issue… as long is the problem we can solve, we work to solve those problems.
Investopedia define the term economic moat, popularized by Warren Buffett, refers to a business’ ability to maintain competitive advantages over its competitors in order to protect its long-term profits and market share from competing firms. Just like a medieval castle, the moat serves to protect those inside the fortress and their riches from outsiders.
Best Quotes by Bill Ackman
“If you are arrogant and investing you will get killed and if you are not confidence you’ll never make an investment. You have to do sufficient amount of work to be confident enough to have the conviction to do something.”
“You don’t have to be old to be right”
“I’m not emotional about investments. Investing is something where you have to be purely rational and not let emotion affect your decision making – just the facts.”
“If I believe that I am right, I will take it to the end of the earth until I am proven right.”
“I love what I do, and I don’t do it for the money. I work on behalf of investors that I like and want to do well for. I’m a competitive person.”
“Investing is a business where you can look very silly for a long period of time before you are proven right.”
“You can learn investing by reading books.”
“Reading is a good habit to learn new things. To become a good investor you must conduct proper due diligence before making any investments. You can learn new investing strategies and techniques by reading financial books; annual reports, etc. start investing small amount and grow from there.”
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