What's up guys welcome to wall street millennial on this channel, we cover all things related to stocks and investing. The pandemic of 2020 has been an economic disaster for millions of ordinary workers and small business owners, as non-essential retail establishments were forced to shut down. Despite this wide-ranging economic hardship, america's billionaires have done quite well increasing their collective wealth to the tune of one trillion dollars. One of these billionaires is a legendary investor bill.

Ackman bill ackman made billions of dollars in the early days of the pandemic by making an extremely well timed bet that increased in value 100 fold. In the matter of just a few weeks. It profited him and his investors 2.6 billion dollars and will go down in the history books as one of the greatest trades of all time. In this video we'll go over, who bill ackman is how he was able to 100x his money and what we can learn from his investing acumen.

This video topic was chosen by our channel members who get access to our non-time sensitive videos one day in advance and get to vote on some of our video topics. Bill ackman built up his career on wall street over the course of multiple decades after graduating. From harvard business school in 1992 he started his own hedge fund, gotham partners. He quickly made a name for himself by shorting the insurance company mbia before the financial crisis of 2008..

He thought the company was a fraud and purchased credit default swaps or cds's against mbia's bonds. A cds gives the buyer a payout in the event that the company defaults on its bonds, it's basically the equivalent of a put option, but for bonds instead of stocks. During the financial crisis, mbia was pushed to the brink of bankruptcy, as financial markets were crashing. Investors fear that there is a real chance that mbia would default on its bonds and the prices of the cds's skyrocketed.

Accordingly, ackman sold his cds position in 2009 minting a huge profit for his fund in 2004. Ackman changed his fund's name to pershing square and his high investment returns attracted billions of dollars from outside investors from 2004 to 2010 percent square, beat the s p 500 benchmark index almost every single year. The blue line represents pershing square's, yellow returns, while the orange line represents the s p, pershing square's cumulative return during this period was 373 percent dwarfing. The 13 return of the benchmark index.

Institutional investors were lining up to invest in acme's hedge fund and by 2015. His assets under management peaked at over 16 billion dollars. However, later that year, his luck turned against him and he had four consecutive years of negative performance losing more than 16 percent. In 2015., in 2014, akman initiated a short position on multi-level marketing company herbalife, which he thought was operating a pyramid scheme.

He published short reports and made numerous tv appearances explaining why the company is a scam and will eventually be shut down by regulators. Initially, his short position seemed to be a resounding success and the stock decreased more than 60. On the back of its accusations, however, people eventually started doubting ackman's claims against the company, as he was short the stock and had an incentive to manipulate the stock downwards from 2015 to 2019. Herbalife quadrupled in value costing him billions of dollars in losses, but herbalife wasn't his only disastrous investment in this period.

He also initiated a large long position in failing retailer jcpenney. He installed a new ceo and thought he could turn the company around. Despite his attempted reforms, jc penney's mod-based strategy still couldn't compete with e-commerce and the stock continued its precipitous decline. These two bets almost wiped out pershing square.

Their aum declined 62 from 16 billion dollars to less than 6 billion, as investors pulled their money out of the fund by 2018. Things were looking pretty bad for ackman. He needed to end his losing streak fast before his few remaining investors pulled their money out too. In 2019, he did just that he returned to his original roots as a value investor and made large successful bets on high quality companies, including berkshire hathaway.

This resulted in a 58 gain far exceeding the s p, but the best was still yet to come. With his 100x pandemic trade in 2020, the exact trade in march of 2020 was a 27 million dollar bet that corporate debts would become significantly more at risk of default in the near future, ackman thought that the market had not yet priced in the chance that some Companies which normally would be seen as stable and durable companies could possibly default on their debt. The pandemic had become a major issue in china and certain other parts of the world, sparking economic, shutdowns and mass quarantines. There were a few cases in the u.s, but had not yet become such a big deal as to affect the markets.

Bill ackman predicted that it would have a much greater impact on the economy than what current market prices for corporate debt implied bill. Lackman publicly said that he was becoming increasingly bearish as early as january of 2020 and thought that america could quote and as we know it, if, then president trump didn't take extreme measures on twitter. He proposed a 30-day total shutdown to the economy, including a rent interest and tax holiday. He said that, due to the exponential growth of the virus each day that a shutdown is postponed, the cost in human lives would number millions and destroy the economy as a result of ackman's analysis of the state of the economy is predictions for the markets he entered Into 27 million dollars worth of credit default swaps on various corporations, these hedges had the potential to pay off many times their notional amount in the event that the market implied probabilities of default increase in an investor letter released on march 26, 2020 ackman detailed.

His position in february he bought credit default swaps on both investment grade and high-yield cds indices. At the time they were trading at very low prices. Ackman believed that, because china was only able to stamp out the virus by instituting a total lockdown, the us and europe were bound to follow the same path which would be detrimental to sox as a result of the new reality. Those hedges ended up paying out 2.6 billion dollars for akman's hedge fund compared to the 27 million dollar investment, including commissions ackman, exited the position on march 23rd for 100 bagger profit whenever a billionaire hedge fund manager makes a trade that seems like it's too good to Be true, there is always some skepticism as to whether or not any nefarious means were used.

On march 18th, bill ackman went on cnbc in a famous interview that eventually became the target of accusations of a pump and dump scheme. In the interview he made several highly extreme warnings saying that hotel companies will go to zero if the company doesn't do anything fast. He went into detail about his father having pre-existing conditions that make it extremely dangerous for him to get the virus and said that life in america would end as we know it. Unless the government takes aggressive action to stop the virus, he seemed pretty worked up throughout the interview almost seeming like he was predicting an armageddon for the country.

This sparked accusations of ackman using his clout to move markets favorably for his short position, maybe just a little bit of context. You know i'm an optimist um but beginning in i don't know. Late january i was getting increasingly bearish and i woke up with a nightmare. My nightmare was you: have this virus that replicates uh and infects incredibly rapidly? You know each person infects two and a half people, each of whom affect two and half people.

You know one becomes two two becomes four four becomes sixteen. Sixteen two, fifty six, sixty five thousand you get to just massive massive numbers. I'm watching this thing, roll out uh in china. It kills.

You know one to two percent people in china. The number has been closer to four people. Think that's because the health system's been overwhelmed, but one to two percent means friends and family are going to die. The concentration was the effect for sort of older people, uh older people with longer cardiac conditions.

I have a father who's, almost 81 he's uh. You know he's got: he had lung cancer, he lost two-thirds of his lung capacity as a result of surgery. He's got some health issues and uh you have a virus. The other thing that really scared me is unlike the flu or when you're sick.

You know you have it here, you go as much as two weeks without showing any symptoms or maybe a little bit of a cold. Meanwhile you're incredibly infectious, and i thought the combination of that. The fact that this the virus lives on surfaces for as much as you know, nine days if we believe what we're reading means, this thing can spread everywhere and when china shut down wuhan, they told people. You know 12 hours from now we're going to shut down.

Wuhan well, what happened? Five million people left one and five million people dispersed around china and five million people dispersed around the world. What's going to happen, if we continue, the way we are operating is until a vaccine is manufactured, distributed and injected. We will go through a depression era period in the country, and millions of people will die around the globe and as many as a million americans are going to die, and it's just meth. Okay and the problem is, if you lock down new york, what will happen is governor, cuomo will say: okay, we're locking down new york uh.

You know there was a rumor of that. So what did everyone? Do? Everyone got out of new york, okay, moved went somewhere else because they didn't no one wants to be locked down and they and they spread the virus and they're not doing it. You know to cause anyone harm, they just don't even know that they're infected and by the way you look at the data from korea there's some very interesting evidence that suggests that people from 20 to 30 are are the massive spreaders. You know the so-called are not you know the reproduction number of the virus, i think, is much higher uh, particularly in that group of people.

So you have a group of people that are, you know 20 to 30 they're millennials they're going out they're having fun. They don't feel sick, not afraid of anything, and they are spreading this everywhere and by the way when the college is shut down, they all go on spring break and they spread it everywhere, and so i think, there's a very high probability that millions of americans have The virus, so it's incredibly widespread, it's deadly and, as we heard on the president's announcement - and this is uh, if you actually track followed twitter, this was out a few days ago. It's killing young people, it's killing healthy people right, and i think, if originally, what happened. If this broke out in new york - and it was killing babies, okay, the country would not have taken the approach it has taken.

Okay, but that is the approach that we have to take assume it's going to kill your child. Okay, assume! It's got a 1 in 50 chance of killing your child and operate accordingly, so it starts with the bottom and it works its way through to the top okay and the same thing's happening right now in our country right, it starts with the guy who owns a Uh embassy, suites hotel, okay, he's wiped out all right. You've got you know when you go from 80 occupied to zero. Okay, your toast you got ta, go down 50.

Your toast, but you're certainly toast when you go to zero, so he defaults. But now you know, take a look at hilton stock. We're a major shareholder of hilton hilton is the canary in the coal mine. This is an incredibly well capitalized amazing, dominant global company.

That actually doesn't know many hotels. It just collects royalties down from like 120 to 50.. Okay, it's going to zero, okay, along with every other hotel company in the world. You know park, hotels and resorts this.

You know stocks down from 33 to 4.. This is a spin off from hilton. Why is it down from 33 to 4 because every hotel is going to be shut down in the country? Everyone hang on hang on just one second um, you say hilton is going to zero. I mean again, i'm a major shareholder.

What i'm saying is if we allow this to continue the way we allow it to continue. Okay, every hotel company in the world, okay, is done clearly some very strong rhetoric there and also clearly an emotional bill ackman on the phone. But you have to give him credit. The virus ended up causing a global pandemic, the likes of which the u.s hadn't seen in 100 years, and the country did indeed go into lockdown.

Eventually. So akron made billions of dollars for investors with his pandemic foresight, but we've also seen that he has the ability to make extremely good investing decisions, even in normal times most people would say that he is one of the most preeminent investors today. So what stocks are he currently holding in this hedge fund? As a traditionally activist investor ackman, holds a very concentrated portfolio of only seven different stocks. According to his most recent sec filing, as of the end of march 2021, ackman held shares of lowe's chipotle restaurant brands.

Hilton agilent, starbucks and howard hughes, notably hilton, which makes up 13 of his portfolio, is one of the stocks that he said would go to zero in a cnbc interview in march of 2020.. Clearly, the governmental response and progress against the pandemic has changed his view on the company. Hilton is a very well capitalized hotel operator and has a very strong global brand. At the end of 2020, they had borrowed several billion dollars and held 3.2 billion dollars of cash.

On their balance sheet to fund their operations, this gives them a cushion to get them through the rest of the pandemic, something that many other hotel operators do not have. It's also a very important thing for a company whose revenue has basically been cut in half over the course of the past year, leading to a large net loss, also according to str hotel occupancy overall is already starting to recover in the week ending march 13. 2021. Overall, hotel occupancy reached 52 percent.

This is very good news for hilton, especially as the reopening gains steam and pent-up demand spills over into travel and leisure. Another notable holding is chipotle. Mexican grill chipotle has gained significant popularity over the past few years, as consumers are drawn to the simple design of their burritos. It also represents a relatively healthy option compared to traditional, fast food options like mcdonald's.

The company has enjoyed consistently growing revenue and profitability, with the exception of 2015, when it had e coli outbreaks at its restaurants, chipotle isn't the only restaurant brand in akron's portfolio. He also owns starbucks, which has been a big winner in recent years. Just like chipotle starbucks has developed a globally recognized brand and consumers are willing to pay high prices for starbucks coffee, sometimes exceeding five dollars per cup. They are also expanding aggressively into international markets, including china, where they have achieved great success.

Starbucks has become an aspirational brand in the country, and many consumers perceive drinking starbucks coffee as a status symbol. Despite a sharp downturn during the pandemic, the company has experienced consistent revenue, growth and profitability, alright, guys that wraps it up for this video, if you like this content, don't forget to like subscribe and share, also check out our second channel wsm research, where we cover high Growth, tech stocks, as always. Thank you so much for watching and we'll see in the next one wall, street millennial signing out.