📖Bill Ackman
Focus on Intrinsic Value
Compare price to intrinsic value, not to past prices.
Always estimate the intrinsic value of a business before investing. Compare price to value, not price to past price. The gap between price and value is where profits are made.
🏠 Everyday Analogy
📖 Core Interpretation
In Focus on Intrinsic Value, Bill Ackman focuses on the gap between price and value. Returns come from paying less than what a business is worth, not from guessing short-term market moves.
💎 Key Insight：The price-value gap is the source of returns.
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❓ Why It Matters
Ignoring valuation turns even good companies into poor investments. Overpaying compresses future returns and leaves little margin when assumptions are wrong.
🎯 How to Practice
Estimate intrinsic value with conservative assumptions, set clear buy ranges, and act only when price offers a meaningful discount with acceptable downside.
⚠️ Common Pitfalls
Confusing a low price with true cheapness
Using one metric without business context
Overly optimistic assumptions that erase margin of safety
📚 Case Studies
1
Canadian Pacific Railway – Ackman-Led Management Overhaul (2011)
In 2011, Pershing Square acquired a large stake in Canadian Pacific Railway (CP), contending that decades of underperformance were due to inefficient operations and entrenched management. Ackman launched a proxy contest to replace the CEO and several board members, advocating for hiring Hunter Harrison, a proven railroad operator, to implement precision railroading practices.
✨ Outcome：Ackman won the proxy fight in 2012, installed a new board and CEO, and CP’s operating metrics and profitability improved dramatically over the next few years. The stock price multiplied, making it one of Pershing Square’s most successful investments. Lesson: When value is trapped by weak leadership, activist investors who secure control and install superior management can unlock substantial long-term gains.
2
Warren Buffett Avoids the Dot-Com Bubble (1999)
In the late 1990s, Warren Buffett refused to invest in high-flying internet and tech stocks, insisting that he did not understand their business models or future cash flows. Instead, he continued buying simple, established businesses like Coca-Cola and American Express, whose earnings and customer behavior were highly predictable.
✨ Outcome：When the dot-com bubble burst in 2000–2002, many complex, hard-to-value tech firms collapsed, while Buffett’s holdings in simple, predictable consumer and financial franchises remained resilient and later compounded significantly. The episode reinforced that avoiding complex, opaque businesses can protect capital and allow steady compounding from straightforward cash-generating companies.
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