It’s been a big end to April for Bill Ackman as his much-anticipated Pershing Square USA (NYSE:PSUS) went live on public markets. Of course, it was a tough slog out of the gate, but for investors interested in a hefty discount, now could be as good a time as any to bet on Ackman, a man with the long-term track record to show. In any case, never has it ever been so easy to place a bet on a big-league hedge fund. And while time will tell if Ackman can continue to produce alpha, I certainly wouldn’t be all too surprised if Pershing Square USA, a closed-end fund, ends up narrowing its discount.
Who knows? If Ackman can hit a few more home runs in the first year or so, perhaps it’s not all too far-fetched to think that something like Pershing Square USA could go for a slight premium. After all, a premium hedge fund manager might call for something a bit closer to NAV.
In any case, I think there’s ample opportunity for Ackman to attract more of the retail crowd to Pershing Square USA, as the man looks to invest in high-quality businesses he recently called “stupidly cheap.” Now, the broad S&P 500 has only marched higher since he made the comments, but, really, a few percentage points above stupidly cheap is still pretty decent, at least in my view.
Ackman’s spot on. High-quality might be going for a discount these days
But, of course, you’ve got to know where to look as there are notable bargains that co-exist with fairly valued plays, expensive stocks, and, yes, even the odd bubble here and there now that the semiconductor trade is picking up where it left off after its recent brief breather.
I think a strong argument could be made that the same high-quality stocks that used to be stupidly cheap at the year’s market depths are even cheaper despite any recent appreciation.
Much of big tech has already had a chance to show its hand for the latest quarter. And while a name like Alphabet (NASDAQ:GOOG | GOOG Price Prediction), a Pershing Square holding, might be notably more expensive than a month ago, I still view it as decently priced compared to the AI dominance you’re getting.
With a new Gemini release rumored to be coming soon, I do think investors are getting a frontier innovator with proven monetization potential for a multiple that’s still very much reasonable. At 28.9 times trailing price-to-earnings (P/E), I think the value case is still as strong as ever despite the latest post-earnings pop and the 129% or so in appreciation in this past year.
What else is stupidly cheap these days?
Apart from Pershing Square USA after that tumble to $42 or so (even Ackman has been a buyer), I think much of the Mag Seven remains on sale. And it’s not just the stocks held in Pershing Square, either. Microsoft (NASDAQ:MSFT) stock, I think, remains one of the cheapest, safest, and perhaps wisest ways to play AI.
As the stock comes in again after reporting a less-impressive number and good, but not incredible, Azure growth numbers, I think there might be an opportunity to snag a front-row seat to a stealthy enterprise titan that’s being unfairly sent to the penalty box over broad software fears, uncertainties with the ever-evolving relationship with OpenAI, and the potential for investors to jump ship from Microsoft, an OpenAI proxy, to the actual OpenAI when Sam Altman’s firm finally does go public.
While there’s no telling when the bottom will be in, I do think Microsoft is historically cheap at around 21 times forward P/E. In my view, that doesn’t make a lot of sense, especially when you consider its data moat, massive userbase that it can sell on AI agents and copilots, its Azure data cloud, and the potential to really kick into high gear when it comes to AI-generated code.
If you want quality that’s even cheaper, Meta Platforms (NASDAQ:META), the social-media titan behind the new Muse Spark model, might be even more absurdly underpriced at close to 20.0 times forward P/E.
The bottom line
In my humble opinion, Ackman is right on the money to highlight how cheap quality has become. And some of the best deals are hiding in plain sight. As Ackman sticks with the names that the market isn’t fully respecting, my guess is that Pershing Square USA might have what it takes to clock in a solid first year of performance.
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