Bill Ackman, activist investor and hedge fund manager running the show over at Pershing Square Capital, is one of the brightest money managers to follow over time. Indeed, he’s made some applaud-worthy bets recently, especially in the face of the 2020 stock market crash.
As a value investor and one of the many disciples of Warren Buffett (the Oracle of Omaha), Ackman is a great role model for any beginning investor looking to do just a bit better than the market averages.
Recently, Ackman made headlines for his latest stock bets. Notably, he picked up shares of Canadian alternative asset manager Brookfield Corp. (TSX:BN), scooping up a position worth around US$285 million. This works out to just shy of seven million shares picked up in the first quarter alone. That’s a massive vote of confidence in a well-run Canadian company that I’ve previously pounded the table on for young TFSA investors seeking the best of both worlds: value and growth.
Ackman places big bet on Canadian icon
With Ackman’s stamp of approval on the name, the big question is whether it’s too late to follow the legend into the Canadian firm at current prices. Undoubtedly, following gurus into stocks can be tricky. You may not only get a much higher admission price (typically, a stock trades higher after news breaks that a big-name investor has initiated a position), but you may also not know how long an investor plans to stick around.
Either way, if you’re one of many Canadian investors who were already long the stock, perhaps Ackman’s latest bet is enough of a reason to get even more bullish on a name, especially if a near-term pullback for BN stock and the rest of the TSX Index is in the cards between now and the end of the year.
Ackman has a nose for value, not just in the U.S. market but in Canada as well.
Perhaps Ackman is best known by Canadians for his significant stake in Canadian Pacific Kansas City (TSX:CP). While Ackman is still long the railway through Pershing Square, it is notable that he’s been trimming his position of late. Indeed, perhaps Brookfield Corp. is the far better bet at current levels, especially given rail strikes and the premium valuation on shares of CP.
Additionally, Brookfield stands out as a firm that may benefit in the long run from any period of mild economic stagnation. The firm has plenty of cash to invest in opportunities when stocks and the economy inevitably head south. In a way, Brookfield is a great way to bet on the economy’s long-term future, regardless of where it’s headed over the near term.
Bottom line
Currently, BN stock is down around 5% from its recent high after dealing with a July-August correction of more than 12%. Though time will tell if a full recovery is in the books by year’s end, I see significant value to be had in the name, even if you’re landing a cost basis north of $64 per share.
The company has legendary managers, profoundly solid cash-generative assets, and now, the backing of Ackman. I believe BN stock is worth a more significant premium than it’s currently commanding. At 18.6 times forward price-to-earnings ratio, Canadian TFSA investors may wish to add now and on any weakness ahead.
