Bill Ackman's Spectacular Investment at General Growth Properties

Exploring a Contrarian Investment Philosophy

Billionaire hedge fund manager Bill Ackman recently shared insights from one of the most remarkable trades of his career, emphasizing a bold investment in a near-bankrupt shopping mall operator. He referred to this as "the best investment" he's ever made.

The Risk of Buying Bankrupt Stocks

During an engaging session with cadets and guests at the Baker School of Business, Ackman recounted how he purchased a 25% stake in General Growth Properties (GGP) in late 2008. The company's stock had plummeted from $63 to merely 34 cents per share. Reflecting on this investment, he highlighted, "The stock transitioned from 34 cents to an impressive $31 a share." He reiterated that making contrarian investments, especially in companies facing bankruptcy, can yield extraordinary results.

Understanding General Growth Properties' Situation

At that point, GGP ranked as the second-largest mall operator in the U.S., weighed down by a staggering $27 billion in debt, with $15 billion due within 18 months. Despite this daunting financial landscape, Ackman remained optimistic about the company's fundamentals. He identified a solid occupancy rate, rising rents, and increasing net operating income as positive indicators, describing the properties as top-tier shopping centers.

Exit Strategy and Significant Returns

Pershing Square Holdings Ltd. (OTC: PSHZF) invested around $60 million for its share in GGP, with Ackman taking a position on the board to influence the restructuring process directly. The investment proved incredibly fruitful, culminating in GGP being acquired by Brookfield Property Partners (NASDAQ: BPYPN) for $9 billion in 2018.

Unexpected Success: A Cab Driver's Story

Ackman also shared an inspiring anecdote about a New York City cab driver who profited significantly from an investment inspired by Ackman’s tip on CNBC. The cab driver initially invested $50,000 in General Growth Properties, which astonishingly grew to a $3 million retirement fund. It’s a testament to how informed decisions can drastically change lives.

The Continuing Legacy

The rescue of General Growth represents a significant achievement in Ackman’s career, showing that when fundamental analyses are sound, substantial returns can be achieved, even from the ashes of bankruptcy. Today, the sentiment surrounding Brookfield Property Partners has fluctuated, with its shares recently showing a minor decline of 1.58%, closing at $13.58. However, the stock has demonstrated favorable price trends in both the short and long terms according to current market analyses.

Market Observations

Investors often face challenges in assessing risk, especially when the investment landscape looks grim. However, Ackman’s experience emphasizes the importance of fundamental analysis and the courage to take calculated risks. Very few would have envisioned the resurgence of General Growth, making it a case study in effective investment strategy.

Frequently Asked Questions

What was Ackman's best investment?

Bill Ackman considers his investment in General Growth Properties as his best investment, yielding massive returns.

How did General Growth Properties perform under Ackman's guidance?

Under Ackman's guidance, General Growth Properties was restructured and ultimately acquired by Brookfield Property Partners for $9 billion.

What percentage stake did Ackman purchase in GGP?

Ackman purchased a 25% stake in General Growth Properties.

What lesson can investors learn from Ackman's story?

Investors can learn the value of conducting thorough research and being open to contrarian investments, even in challenging situations.

How much did the cab driver profit from GGP's stock?

The cab driver turned a $50,000 investment into a $3 million retirement fund, showcasing the potential benefits of investing wisely.

About The Author

Greetings, I'm 32-year-old author and financial specialist Evelyn Baker. My introduction into the financial industry started with an economics degree and continued with a wealth of experience in wealth management and financial consulting. My great passion over the years has been assisting people and companies in making wise, well-informed decisions to reach their financial objectives.

My goal with writing is to simplify difficult financial ideas into understandable, doable guidance. My goal in writing many books and articles is to make personal finance understandable to everyone, irrespective of their experience or background. I want to give readers the information they need to take charge of their financial futures, from investing and retirement planning to budgeting and saving.

Along with my writing, I lead webinars and workshops where I provide doable advice and methods for achieving financial success. To reach a larger audience, I also frequently contribute to financial blogs and publications. My method is always to offer doable, real-world guidance that can actually improve people's lives.

Aside from my job, I like to cook, travel, and experience other cultures. I work hard to apply my belief in the value of a balanced life to my financial counsel. My goal in working is to encourage and enable people to succeed financially so they may lead the best lives possible.

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