Ackman: permanent capital as a structural edge

Published: 2026-02-18 — Pershing Square Holdings 2025 Annual Report, Letter to Shareholders

The diagnosis

Bill Ackman opens the investment philosophy section of Pershing Square's 2025 Annual Report letter with a blunt claim: the stock market is broken. 1

Not broken in the sense of being rigged or fraudulent. Broken in a structural sense. Two forces, working together, have decoupled short-term price movements from the underlying economics of businesses. First, the dominance of index funds has shrunk the pool of freely traded shares, reducing the float that sets prices at the margin. Second, the remaining active trading is increasingly dominated by market-neutral and quantitative funds running high leverage, with stop-loss triggers and swap exposure that force mechanical selling when a stock drops past a threshold. The result, Ackman writes, is that stocks can trade "in a completely irrational fashion in the short term when a company fails to meet and/or exceed analysts' or investors' expectations," with volatility "well in excess of reasonably anticipated potential intrinsic value risk or impairment." 1

It is a structural critique, not a cyclical one. Ackman is not saying the market is temporarily overheated. He is saying that the dominant ownership and trading architecture has severed the link between short-term price and long-term business value — and that this severance is likely to persist.

The passage

That diagnosis sets up Ackman's central investment argument:

"The market increasingly appears like a casino where money is wagered over the course of a day, hours, minutes or even seconds. This mismatch between stocks, which represent perpetuity interests in businesses that are inherently long-term assets, and their temporary 'owners,' creates growing opportunities for the patient investor with stable capital." 1

And then, in the sentence that crystallizes the framework:

"Because of our permanent capital structure, the increasingly volatile market dynamics will likely continue to offer us occasionally extraordinary opportunities to buy the highest quality durable growth companies in the world at bargain prices." 1

The phrase "permanent capital structure" carries the full weight of the argument. Pershing Square Holdings is a closed-end, publicly listed vehicle — shareholders cannot redeem at NAV. That structure matters not as a fundraising detail but as an investment weapon: when leveraged traders face margin calls and are forced to sell quality businesses at distressed prices, Ackman can buy without any parallel pressure to raise cash.

What "quality" and "bargain" actually mean here

Ackman's framework does not reduce to a P/E screen. He distinguishes quality companies by their possession of durable structural advantages — global scale, dominant market positions, access to low-cost capital, and, increasingly, AI leadership positions that reinforce competitive moats over time. On the "bargain" side, he points to a data point that grounds his confidence: the S&P 500's roughly 112% total return from 2020-2025 was driven approximately 10 percentage points per year by EPS growth and only about 3 percentage points by P/E multiple expansion. 1 The market's rise, on this reading, is mostly earnings growth — not speculative re-rating. He adds that the top 10 S&P 500 companies, which represent nearly 40% of index capitalization, are expected to grow EPS above 20% annually for the next two years — roughly triple the expected growth of the remaining 490 companies. 1 On that basis, he argues that the premium multiple attached to this group is structurally justified rather than speculative.

The framework in practice: The Three

Ackman illustrates the framework through three sequential purchases he calls "The Three": Alphabet (acquired early 2023, during panic over ChatGPT's apparent competitive threat to Google Search), Amazon (acquired April 2025, during the immediate sell-off following President Trump's global tariff announcements), and Meta (acquired late 2025, when the market punished the company's AI capital expenditure program). In each case, a visible short-term dislocation offered an entry into a business Ackman had "long admired" but could not buy at an acceptable price until the casino created the opening. 1

On the market's negative reaction to AI capex spending across all three names, the letter is direct:

"When a business you own, managed by a management team you trust, announces a large increase in capital spending due to increased demand for its products or services, you should be applauding rather than booing. If, however, the surprise in capital spending is due to an unexpected increase in capex due to larger than anticipated maintenance capex requirements, then boos are appropriate." 1

The framework has a sell discipline too. Pershing Square exited Hilton in early 2026 after its valuation multiple had expanded from 23x to 32x earnings over a seven-year holding period during which EPS grew roughly 150%. 1 The thesis, in the framework's logic, was complete: the bargain had expired.

What to watch for in your own portfolio

Ackman's framework implies a specific diagnostic question for long-term investors. When a high-quality business you have followed for years drops sharply on what appears to be short-term noise (a disappointing quarterly miss by one cent, a capex announcement the market reads as out of control, a macro panic that hits everything indiscriminately), the question is whether the dislocation is structural or fundamental. If the underlying earnings power and competitive position are intact, and if the selloff is driven by entities that are mechanically forced to reduce exposure rather than by a genuine reassessment of intrinsic value, the framework says the rational response is to buy more, not less.

The difficulty, of course, is in that "if." Ackman's track record suggests he can distinguish the two with reasonable consistency. His since-inception NAV CAGR of 16.2% against the S&P 500's 10.7% across 22 years (cumulative 2,644% versus 836%) is the empirical argument that the framework works. 1 For investors without permanent capital or Pershing Square's research depth, the practical application is simpler: use the next market panic as a checklist moment, not a sell signal.

The full letter is available at pershingsquareholdings.com.

참고 출처

1Pershing Square Holdings 2025 Annual Report — Letter to Shareholders