Pershing Square (PS) Q2 FY26 earnings call: guidance and Q&A

Bill Ackman emphasized that Pershing Square Inc. is designed to grow at a high rate even without new fundraises, driven by the compounding of earnings from underlying portfolio companies such as Amazon, Meta, Microsoft, and Netflix. He expects these stocks to re-rate to higher valuations, which will increase the firm's net asset value, fees, and performance fees. The strategy focuses on allowing the inherent growth of high-quality businesses to drive long-term value.

The IPO of Pershing Square U.S. (PSUS) occurred during a period of significant market volatility^🌐, which management viewed as an ideal environment to deploy its $5 billion capital. The firm leveraged its extensive library of potential investments to acquire attractively priced positions, including Microsoft, Meta, Alcon, Netflix, Visa, and Mastercard, without facing intense competition for capital deployment.

Pershing Square plans to launch Pershing Square Ventures by fall/end of year. This new vehicle aims to provide public market investors with access to private, fast-growing, disruptive companies, spanning valuations from several hundred million to multi-billion dollars. It is designed as a permanent capital vehicle, allowing the firm to retain long-term ownership of companies even after they go public, offering a unique proposition to private enterprises.

Management acknowledged the 'absurd' trading discount of PSUS shares, which are trading in the high $30s compared to an approximate NAV of $50. This discount was attributed to initial IPO allocation issues and a lack of demand generation. A comprehensive plan is underway to address this, including increased marketing efforts, engagement with financial advisors, and better communication of PSUS's value proposition as a low-cost, liquid alternative investment.

Pershing Square is actively transforming its strategic holding, Howard Hughes, into a modern-day Berkshire Hathaway, with a primary focus on expanding its insurance subsidiary, Vantage. The firm has recruited a 'dream team' to lead Vantage and plans to allocate $2.5 billion to $3 billion of Howard Hughes' free cash flow over the next 3-5 years into the insurance operation. This strategy aims to significantly increase Howard Hughes' intrinsic value, targeting north of $200 per share by 2030.

Management discussed the long-term return on invested capital for hyperscalers like Amazon and Microsoft, which are investing heavily in AI infrastructure. They noted a 2.5-3 year lag between significant CapEx and revenue recognition, creating a temporary disconnect in reported earnings. However, they expressed confidence that these investments, driven by strong demand and non-cancelable contracts, will yield high returns, drive future revenue growth, expand margins, and eventually lead to lower CapEx to sales ratios.

The firm's asymmetric hedging strategy is episodic, designed to protect against 'black swan^🌐' risks that are infrequent but highly impactful, such as a financial crisis or massive inflation. A dedicated team continuously monitors potential risks and evaluates various hedging instruments. While no hedges are currently in place, the goal is to achieve 5x-10x returns on hedges when implemented, with past successes yielding 20x-100x.