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The Equitymaster Research Digest

How to Be Smarter than the Smartest
Mar 23, 2016

  • Is Bill Ackman Confident or Arrogant?
  • MCM subscribers would never make these mistakes
  • Why some Tata companies are better than others

Bill Ackman is a famous US hedge fund manager.

Ackman graduated magna cum laude from Harvard. This is a rare achievement, similar to being a topper from the prestigious IIM Ahmedabad. Ackman is the creme de la creme, the brightest of the brightest.

He was in the news recently for all the wrong reasons. Turns out, Ackman lost more than a billion dollars in one stock...in one-day.

Ackman could have avoided the crushing loss. Had he followed a proper investment plan, he would have walked away with a fat profit.

Instead, one of the smartest guys on the planet hung on. He hoped the stock would keep going higher.

Confidence or plain old arrogance

Are you guilty of hanging in there and hoping, just like Ackman? Or are you smart enough to know when to book profits?

The stock that lost Ackman more than a billion dollars was pharma company Valeant Pharmaceuticals.

The stock is currently trading around US$30. It touched an all-time high of US$262 back in August 2015. It's fallen 90% since then. And Ackman has held on to it all the way down. He's still holding on:

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