Ackman's takes new position in Netflix - 8.2% Loss in January

R

RedSun

It appears Pershing Square already may have had some NFLX position before the 20% plunge. And he bought more. Now NFLX stands at $399. Not far from the $390 when the new broke out.

Ackman stated in order to buy the NFLX stake, he had to sell his interest rate hedge that "made" him $1.25BB. And that hedge would have made him more money. So he made a bad trade. I just wonder there that $1.25BB went.

For Jan-2022, S&P loses 5.23%. Equity hedge funds lost 6.22%. Ackman's Pershing Square lost 8.1%.

https://www.reuters.com/business/fi...g-square-ends-january-down-82-pct-2022-02-02/

https://www.reuters.com/business/me...square-takes-new-position-netflix-2022-01-26/

BOSTON, Jan 26 (Reuters) - Billionaire investor William Ackman has built a new stake in streaming service Netflix Inc worth more than $1 billion since its stock price tumbled starting last Thursday.

Ackman told investors that his hedge fund, Pershing Square Capital Management, started buying on Friday and now owns more than 3.1 million shares in Netflix, making Pershing Square a top 20 shareholder.

In a letter to his clients, Ackman praised the company's "best-in-class management team" and on Twitter the manager said he has long admired Netflix CEO Reed Hastings and the "remarkable company he and his team have built."

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What made me wonder is that, reports and his statements always say he made how many $MM or $BB. But where those profits went? His yearly returns just do not show up. Or they do not add up.

That $1.25BB is more than 6% of his AUM. He only made 27% in 2021 and is -8.1% in 2022.
 
RedSun said:
Ackman stated in order to buy the NFLX stake, he had to sell his interest rate hedge
More...

This move confirms one of my current market biases, that NFLX (specifically since this most recent dump) is undervalued relative to present interest rate yields, therefore I like it.

The last few times this has happened (Oct 2002, Mar 2005, Jul 2007, Nov 2008, Jun 2009, Nov 2011, Sep 2012, Nov 2018, Mar 2021) this trade worked magnificently. If I actually had an interest rate hedge to close right now, I'd be in on this.

To clarify, I'm not interested in NFLX on its own merits, just as its price relates to treasury yields. Prima facie a heterodox comparison but one that Ackman at least deems noteworthy enough to drop a chunk of change on. I tend to agree.
 
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Not my taste though....

I do not buy over-valued stocks like NFLX. Should be under-perform this year.

If you read it carefully, Ackman held an interest rate swaption. He is paid when long-term interest rate goes up. And it did. And most of his stocks dropped in value since interest rate has gone up.

But NFLX is not only interest rate related. It is company specific. NFLX is losing market share and losing market leadership. This is not something his interest rate swaption can hedge away.

And this $1.25BB is more like his capital than his gain, as reported.....
 
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