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Pershing Rationale for Exiting Citi


bmichaud
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http://www.marketfolly.com/2012/09/bill-ackman-on-why-he-sold-citigroup-c.html

 

Recent events in the banking world - in particular, a large surprise derivative loss at JP Morgan and the recent LIBOR manipulation scandal - were the proverbial straws that broke this camel's back.

 

I can sympathize with this line of thinking....

 

RE: http://holdings.nasdaq.com/asp/OwnerPortfolio.asp?FormType=OwnerPortfolio&CIK=0001336528&HolderName=PERSHING+SQUARE+CAPITAL+MANAGEMENT%2C+L%2EP%2E

 

Well,... only that he put the money in PG surprised me,...this might get him only a mediocre return. If he would have bought GM or CHK, as Mohnish has done, or even DELL, that would have been fine in my opinion, but PG...  :o

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http://www.marketfolly.com/2012/09/bill-ackman-on-why-he-sold-citigroup-c.html

 

Recent events in the banking world - in particular, a large surprise derivative loss at JP Morgan and the recent LIBOR manipulation scandal - were the proverbial straws that broke this camel's back.

 

I can sympathize with this line of thinking....

 

RE: http://holdings.nasdaq.com/asp/OwnerPortfolio.asp?FormType=OwnerPortfolio&CIK=0001336528&HolderName=PERSHING+SQUARE+CAPITAL+MANAGEMENT%2C+L%2EP%2E

 

Well,... only that he put the money in PG surprised me,...this might get him only a mediocre return. If he would have bought GM or CHK, as Mohnish has done, that would have been fine in my opinion, but PG...  :o

 

He put 20% of Pershing in PG whereas someone would be crazy to put that much into CHK or GM - so say CHK and GM double, whereas PG only rises 50%, Pershing still comes out the same (assuming he'd only put 10% in CHK or GM) with much less risk and, as Ackman said, fewer sleepless nights. Again only my guess, but I bet Ackman wouldn't be comfortable with more than 5% in those names....proving the point even more.

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Guest rimm_never_sleeps

the key takeaway.

 

While I still believe that Citi is a very cheap, well managed, high-quality banking franchise that is likely to increase in value over time, there are much easier ways for Pershing Square to make money.  As a result, we redeployed the capital from the Citi shares into our new investment in Procter & Gamble.

 

 

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the key takeaway.

 

While I still believe that Citi is a very cheap, well managed, high-quality banking franchise that is likely to increase in value over time, there are much easier ways for Pershing Square to make money.  As a result, we redeployed the capital from the Citi shares into our new investment in Procter & Gamble.

 

the key takeaway from above "much easier ways for Pershing Square to make money." i.e. take activist roles and influence management/board

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He exited Citi because he is uncomfortable with the systemic risk in the global banking system, as many people are.

 

We don't talk about it over on that BAC thread that much, but this is a key factor why it (and Citi) plummeted last summer in unison, and they rally in unison whenever there is good news out of Europe -- any news that takes systemic risk out of the equation is moving these stocks up dramatically as we saw last week.

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