Bill Ackman’s first stock was Wells Fargo, and Warren Buffett was a key factor in his selection.
The billionaire invested only $40,000 in the bank as a business-school student.
Wells Fargo, which Ackman counts Buffett as a large shareholder, was oversold at the time.
Bill Ackman made bank on the first stock he ever bought — and it was a key reason why Warren Buffett placed the bet.
of Billionaire boss In the year When he arrived at Harvard Business School in late 1990, Pershing Square had just $40,000 to his name, he said.Julia La Roche’s show“This week the parents paid for the school, and the sum had to cover all other expenses.
However, Ackman soon discovered that there was a dearth of investment courses at Harvard. He decided to get some experience by opening a brokerage account and buying stocks instead.
“This was my lesson in investing, and if successful, it can be a career.”
Ackman spent two years in real estate, so he decided to focus on companies in that sector – which at the time was in a deep recession. Bank stocks caught his eye as they sold off sharply amid fears that lenders would collapse amid the turmoil in commercial real estate.
“My first real investment was buying Wells Fargo stock,” Ackman recalled. “I started following Warren Buffett and he was a big shareholder with a very high valuation.”
Ackman bought 1,000 shares at $8.375 a pop, and another 1,000 shares at $8.625 a pop, according to the traders. They eventually sold the shares for $21.50 each, the person said.
The comment indicates that Ackman paid a total of $17,000 for the 2,000 shares, then cashed them in for $43,000 — a profit of $26,000, or roughly 150%.
Wells Fargo has held three 2-for-1 stock splits since 1990, meaning Ackman bought the stock on a dividend-adjusted basis when it traded above $1, compared with $41 today.
Ackman chose Wells Fargo in part because his father’s company, which helped real estate developers get financing, couldn’t get loans from the banking giant for its clients. As a result, Wells Fargo was convinced that it was a conservative lender, and that the market’s perceived real estate exposure might be overstated.
Moreover, Buffett Berkshire Hathaway He had. It took place Last year at Wells Fargo. The elite investor group continued to add to its holdings in 1990, and the lender’s stock nearly halved within a few months of that year. It ended the year with a stake of nearly 10% at $289 million.
Buffett praised Wells Fargo as a “super-managed, high-return banking operation” and dismissed concerns about its real estate exposure. Letter to shareholders For that year, it was published several months after Ackman invested.
“I had a sort of Warren Buffett imprimatur, and I had a thesis, and that was the basis for stock investing,” Ackman said. “I bought it, and it quickly went up to 50%, and I was like, ‘Okay, this is cool.'”
“If I bought the first stock I lost half my money, I probably would have done something else,” he added.
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