13F filings for Q1 were due earlier this month, but as we constantly note they provide a limited window into fund activity. A great example of this was Pershing Square detailing numerous changes to equity positions which for the most part did not show up in their 13F filings. One of those was a new holding in Amazon. See another good recent example on 13F limitations embedded below.
They reported the $META purchase a few weeks ago in their shareholder letter, the $V looks like a mistake or they trimmed since their 13F was filed! You can see more here https://t.co/rovBILe84G https://t.co/rfoaQ0w6fF
— Hedge Fund Alpha (@Hedgefundalpha) May 23, 2025
The press reporting on Bill Ackman's new stake in Amazon was confusing - so we decided to look into it. On May 22nd 2025 at 1:30PM EST, Ackman held a conference call. During the call Ackman discussed several investments and then turned it over to Ryan Israel, Partner and Chief Investment Officer at Pershing Square who detailed the new Amazon purchase. We listened to the call and generated to get an idea of what the thesis was for Amazon.
Read hedge fund letters here
Here are the key points:
- Pershing Square added Amazon as a new position.
- They consider Amazon a "fantastic franchise" and have followed it for many years, waiting for the right price.
- The opportunity arose in April when the market was in turmoil, partly due to tariff announcements, causing Amazon's share price to drop over 30%.
- They acquired shares when Amazon was trading at about 24.5 times earnings, the lowest multiple they had seen for the company.
They highlight Amazon's two main businesses:
- AWS (Amazon Web Services) Leading the cloud revolution, with significant growth potential as IT workloads move to the cloud. They see AWS as the "800 pound gorilla" with over 40% market share.
- Retail Business: An incredible e-commerce franchise with a vast selection, strong logistics, and focus on price and customer experience.
- They believe both businesses, while disparate, share a core framework of using massive scale to drive down prices and improve customer experience, creating a virtuous cycle.
- They admire CEO Andy Jassy and his efforts in making the business more efficient, expecting more profit margin expansion and high revenue growth.
- They felt concerns about a slowdown in AWS or the impact of tariffs were overblown and that Amazon is on its way to continuing its 20%+ earnings per share growth.
- The decision to invest was also facilitated by having cash on hand from trimming or selling other positions.
Below readers can find a partial transcript of the call which discusses the investment in Amazon. We also included a discussion by Ackman of Howard Hughes, Fannie Mae, Chipotle, Nike, UMG and a few other positions.
Please note the transcript is 99% accurate but may contain a typo or error or two.
Pershing Square Conference Call Transcript
Now we're not generally investor in markets, we're investor in a handful of specific companies and situations. We're going to address those in a little more detail.
Howard Hughes
Just want to cover the Howard Hughes investment. You know, this is an company we've been a shareholder of for since it was fun out of general growth when the best and really the best equity investment we made as a multiple of capital. The company was really set up to make general growth more valuable. It took years to sort through the various assets, put, understand the underlying core business and then focus the company over time to a core. What we call MPC or small cities of business of building out and developing small cities of business we think is actually a superb business on a multi decade basis.
One that is meaningfully transformed over the last 14 years from being really not much of a cash generative business on any kind of recurring basis to today. One approaching 300 million of net operating income from income producing real estate assets. Kind of a pretty consistent, you know, significant demand for from home builders for lots in light of the pretty dramatic supply demand and balances in the US housing market. The fact that people want to move to, you know, Phoenix and Texas and in Las Vegas and then the company's extremely successful condominium business. But again, a complicated business in multiple states and pretty much every property type development.
These are all the characteristics that the typical real estate stock market investor does not like. They prefer single asset. In some cases, single geography or focused geography income producing assets in a real estate investment trust format that pays a dividend. This is a sea corp in multiple jurisdiction, large land holdings, as well as a lot of development.
Our conclusion after being a shareholder for many many years and a very strong management team being in place, but really not much if you will respect from markets. Companies traded at a very consistent discount. You know, is that we needed to make a strategic change? We beginning of the effort was, okay, let's take the company private. We went out to the private markets and we really could not find the capital that we needed to take this business private and keep it private for on a very long term basis. You know, long term for most long term investors is a five or seven year. Privatization followed by some kind of liquidity event, not something we could create for our use.
We pivoted to a different structure and we made a deal ultimately with the company for the purging square management company to invest 900 million of capital by 9 million additional shares taking our ownership up to about 47% of the company. We paid $100 a share versus a $66 stock price, obviously a very, very big premium and we did so in order really to put us in a position. To help transform the company into what we're calling a diversified holding company.
Part of the thesis is that we think as a standalone pure play real estate development company, the market will continue to sign a very high cost of capital, a cost of capital that probably cannot be exceeded, meaningfully by a pure play real estate development company. By transforming the business into unrelated business lines, not correlated with the property markets or so correlated, for example, with interest rates, how it used today seems to trade on the basis of where the 30 year or 10 year treasury or where mortgage rates are, even though we really have not seen any change in demand for property at how it used at meaningfully higher. When we had 3% mortgage rate, 30 year rates or today approaching 7% 30 year mortgage rates. So we're quite excited about that opportunity and we think it's a great opportunity for our investors and the purging square funds.
This is a meaningful position, call it 8 or 9% of capital. It's very, very inexpensive on a standalone basis and we think the transformation will attract a much broader investor base. We think there's a very small universe of people, prepared to own a pure play real estate developer, but a much larger base of investors that can own a diversified holding company. If you look at the Berkshire Hathaway market cap, trillion or so dollars, only take a tiny small fraction of those shareholders to take an interest into the early days of how it used and we get to see a meaningful rewriting in the company.
One of the key initiatives to let the world know that this is going to be a different business is we are very focused, perhaps is our first initiative for how it used in identifying recruiting a team to build a insurance operation. With long-term ambitions with Berkshire Hathaway has accomplished over time, there are many benefits to building an insurance operation within a diversified holding company in terms of incremental credit support that can be provided by a diversified holding company. Here the entity is owned, Howard Hughes is owned in part by a minus A rated 32% owner comprised of the Pershing Square funds - it's got a well capitalized owner.
Howard Hughes itself is the business will generate meaningful cash over time which will be an interesting source of capital for investment and we have 900 million of capital we just injected which forms the base for building an interesting insurance operation. We have some discussions underway with a couple potential CEOs that would be outstanding choices and we look forward to reporting back as we make progress with the business and then of course we are also open to acquisitions of high quality businesses that meet our threshold but we are looking unlike the Persians were funds we buy minority interest in public companies. Companies here we are intent would be to purchase controlling interest in private companies or controlling interest in public companies or 100% privatization transactions.
I'm going to turn it over to Ryan just to talk about some of the interesting trading dynamics that were created when you own a portfolio of very high quality businesses that are not materially affected by tariffs but every stock moves up and down based on overall views of what's happening with tariffs that does create interesting opportunities. Ryan you get into some of the changes that we made during the quarter.
Ryan Israel: Bill mentioned this was a pretty active quarter for us in terms of the underlying positions that we either trimmed sold added to or had new positions in and I think what's interesting at a very high level is the process that we go through when for example in this quarter we trimmed or in the first four and a half months I should say we trimmed five positions we sold out of one entirely we added to two existing positions and we bought three entirely new positions.
That sounds like a lot of activity but I think what's important is it's exact same process we go through the same fundamental mindset as when we have almost no portfolio activity and it doesn't change at all or very little from quarter to quarter. And the reason for that is we're very much bottoms up investors as Bill mentioned where we look at each individual investment in our portfolio we try to be very thoughtful at looking at what the perspective returns are on that investment relative to the future business prospects.
And we try to think about based upon the relative risk and reward what would be the appropriate size for each individual position if we were to start from a blank sheet of paper a lot of times the economic environment or the perspective future returns suggest we shouldn't make any decisions differently than what we already have this first four and a half months though given a lot of the backdrop of the markets and the potential economic outcomes actually resulted in a significant number of changes which were running the gamut from modest to pretty substantial.
Trades
So with that I'll give you a little bit more background in detail what we did to start the year in January there was a lot of market excitement about what would be coming on economically in terms of potential political outcomes and as a result yes and P was trading at all time highs and a handful of our companies actually were trading at all time highs as well. And so we decided in evaluating that risk reward and relative to the sizing of investments to make some reductions. So for example we reduced our position in Chipotle in January by a little over 10% reduced our position in alphabet or Google by a little over 20%.
We reduced our position in Hilton by more than 40% and we actually ended up restructuring as we talked about before our position in Nike from a common stock investment into a deep in the money position where we could affect option option. Where we could effectively replicate the same dollar profits on the upside if a company achieved the potential we thought while extracting a lot of capital from the position. We were able to take the vast majority of those proceeds and invest them in Uber at a time in which we thought Uber was very uniquely attractively priced and so we were able to make that swap.
Most of the stocks that we have trimmed actually we're trading quite below the levels at which we sold them at and Uber already although it's still early is up about 35% from our cost and Charles will talk about that position some more detail in just a moment.
At the same time in March we were able to sell our position trim the position in universal music group by just under 40%. I think it's important to point out universal music group in our nearly four year holding period is generally averaged about 25% or mid 20% of capital which is much larger than our typical position and so the reduction of about a high 30% of UMG brought it back down to what would be more of a typical larger size position for us. And then in April we actually sold out entirely of our position in Canadian Pacific which is a wonderful business but was also one which had held an incredibly well in terms of a share price during a lot of the tariff turmoil that happened in April and we judged actually was one of the more sensitive businesses economically and to tariffs relative to the rest of the portfolio and we were able to use the position of the cash that was generated by UMG and CP in order to increase to positions.
So we actually were able to buy back all of the shares and alphabet that we sold in January in the March and April time frame actually about 20% cheaper than we had sold the math. We also increased by a little bit more than 10%. I'm sorry by almost 20% our position in Brookfield at prices that were about 10 or 12% below where they are now and then perhaps most importantly we added a new position which is Amazon. We also were able to increase our first position which we previously talked about and you can see on Bill's Twitter account.
Amazon
But perhaps I'll spend a little bit of time talking about what I think is the most substantial move which is Amazon. Amazon I think really is emblematic of a business that Pershing Square thinks is just a fantastic franchise. At the same time I think it really highlights what's a little bit unique about our approach which is we follow a collection of hundreds of businesses that we have not really owned or haven't owned in a long period of time. That we think our first rate businesses that we would love to own when we think the prices right and we think the returns meet the threshold that we're looking for and Amazon has been on that list for many years. So what was unique was our ability because we knew the business very well to quickly move to acquire position in April when the market was in a lot of turmoil.
So to back up on Amazon what we thought was kind of interesting was Amazon has two businesses. It has a cloud business called AWS or Amazon Web Services which is really leading a lot of the technological revolution as AI and increased computer services are moving off of companies work sites and into what they call the cloud or large data centers where a company like Amazon is able to manage all of that IT infrastructure and processes for people. It's cheaper than what they can do. It's much more reliable. It's much faster and Amazon is sort of the 800 pound gorilla in that business where there's only three players and they have over 40% market share and we think the future is incredibly bright for that business is less than 20% of all of the IT workloads are actually in the cloud today. We think going forward maybe as much as 80% or everything but 20% in the future should be in this type of environments.
So that part of the business is amazing. There's also part of the business even though that is the web service is a 60% the remaining 40% for Amazon is the retail business. That's the business that we all know and you probably use almost on a daily basis today. And that's an incredible e-commerce franchise that really has over 100 million unique skews that they serve the customers around the world where they've invested enormously in logistics franchise to be able to get you most products within a day of service and they've been able to carefully curate the best selection and the best price.
One of the things that makes Amazon really unique is it has these two disparate businesses which we think individually are very valuable but they share a very common and core framework which is Amazon tries to build up massive scale use the advantages of that scale to drive down price and improve the customer experience. And then that be gets even more scale is more people want to do business with them and they keep reinvesting. And so that positive or virtuous cycle of gaining scale getting a little bit more profit margin and then reinvesting a lot back in the customer is something that unites the businesses and we think is made Amazon very special.
So we've admired it for a long time. We think Andy Jassy in the CEO who's been in the seat for several years is doing an incredible job of really getting more efficient with the business which we think will allow for more profit margin expansion at a high rate of revenue growth. And so we've been big fans but we had not yet judged that it would provide us with returns we were looking for historically because the business is generally traded at a pretty high multiple which reflected the great future growth outlook. And that really changed earlier this year. Initially back in February when the company was at in all time high there were some concerns in the cloud business that because of deep seek in China or potentially some concerns about the sustainability of AI that people would not be investing in the business in the same rate that they would and that the web services business rate of yes might slow a little bit.
And then after the announcement of tariffs in April the business took a real dive people were worried about the tariff impact and as a result Amazon share price came down more than 30% and actually was trading when we started buying our shares at about 24 and a half times earnings which was the lowest multiple that we've seen ever since we followed the company in its history. And so we thought this is uniquely attractive time as we felt that the company would be able to work through any slow down in the AWS business and we did not judge that tariffs would have a material impact on the earnings in the retail business as well. And so we thought Amazon would be well on its way to continuing its plus 20% earnings for share growth.
And so as a result I think that really highlights how we've looked at things which is we carefully study a lot of businesses. We wait very patiently until their opportunities and given some of the sales that we had either trimming or an outright sales of other businesses we had cash on hand to be able to quickly move when we judge that there was a unique opportunity in the market.
