Bill Ackman Takes on Charlie Munger in Moral Debate
November 11 2015 - 8:08PM
Dow Jones News
By Monica Langley and Erik Holm
William Ackman has long looked up to Warren Buffett. It took a
massive, money-losing position -- and an obsessive aversion to
sugar -- to cause some friction.
The hedge-fund manager took a shot at Mr. Buffett's longtime
investment in Coca-Cola Co. on Wednesday, saying the soda company
has "caused enormous damage to society."
The broadside came at a New York conference celebrating the
Oracle of Omaha's half-century running Berkshire Hathaway Inc. And
it reflected growing frustration with repeated criticism from Mr.
Buffett's longtime sidekick against one of Mr. Ackman's most
prominent investments, Valeant Pharmaceuticals International
Inc.
That criticism by Berkshire Vice Chairman Charles Munger against
Valeant included comments in an interview with The Wall Street
Journal last week: "It's just a company that was too aggressive in
ignoring moral considerations in the way it did business."
Valeant has defended its ethics and says it is trying to do a
better job of listening to its critics. Its stock, however, has
tumbled amid questions about its relationship with specialty
pharmacies that distribute its drugs and its growth prospects,
producing losses on paper of more than $2 billion for Mr. Ackman's
Pershing Square Capital Management LP.
Valeant's shares fell another 5.7% Wednesday to $78.90, leaving
them well below the $186 that Pershing Square paid for them on
average. The decline means that Mr. Ackman, who makes concentrated
bets, is on track to post the hedge fund's worst year since it was
founded in 2004.
At the event at the Museum of American Finance on Wednesday, Mr.
Ackman was speaking as an investor "inspired by Berkshire
Hathaway," and he considers himself a value investor in the Buffett
mold. He has studied Mr. Buffett's investment history in great
detail, and was even lauded on the cover of Forbes magazine earlier
this year as the "Baby Buffett."
They part ways at Coke.
Mr. Buffett famously drinks several Cherry Cokes a day, and the
company is one of the largest and longest-held positions in
Berkshire's portfolio. Wednesday's event honoring him began serving
Coke to attendees before 8 a.m.
Mr. Ackman, meanwhile, is a health and fitness devotee who
contends that "sugar is poison." Meals with him are a lesson in
abstinence, with bread baskets going untouched and fruit the only
acceptable dessert. Nearly every employee who started at Pershing
Square with extra weight has lost it.
"Coca-Cola has probably done more to create obesity and diabetes
on a global basis than any other company in the world," Mr. Ackman
said at the conference.
"I have a problem with Berkshire's ownership of Coke," he said
in response to a question about whether he'd found himself on the
opposite side of a trade from Berkshire. "Coca-Cola is a company
that I wouldn't own."
Coke defended its products, saying it sells more than 200 low-
and no-calorie drinks in North America, including bottled water.
Soft drink makers like Coke also say it's unfair to single out soda
and other sugary drinks for causing obesity and other health
problems.
"These comments are irresponsible and do not recognize the
current breadth of our business," a Coke spokesman said
Wednesday.
Mr. Ackman's absolutism does have its limits. Earlier in the
year when Pershing Square weighed whether to take a position in
Oreo cookie maker Mondelez International Inc., the firm was
satisfied that the company in its view met a couple of key
criteria: It presented an opportunity for further cost cutting and
could be a potential takeover target.
But Pershing Square's staff worried about Mr. Ackman's hard line
on sugar. A colleague brought Mondelez products to the investment
committee and waited to see if Mr. Ackman would eat an Oreo. He ate
two. That was the go-ahead to start buying.
"Everything in moderation," Mr. Ackman said Wednesday. "It's
complicated."
He pointed out that Mondelez products such as cookies and candy
bars can be treats after a healthy meal, not outright replacements
as Coke products can be for water.
Other comments about Berkshire and its leaders by the hedge-fund
manager Wednesday were positive. He argued at points during the
event that Mr. Buffett was deserving of admiration and deeply
ethical -- not to mention "genetically interesting" given his
apparent ability to survive his Cherry Coke habit.
And without mentioning his now-unprofitable Valeant stake by
name, Mr. Ackman joked that he'd been learning new investment
lessons lately. While Mr. Buffett often tells investors to "be
fearful when others are greedy and to be greedy only when others
are fearful," Mr. Ackman says he's lately learned to "be fearful
when others are fearful."
Anupreeta Das contributed to this article.
Write to Monica Langley at monica.langley@wsj.com and Erik Holm
at erik.holm@wsj.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires
(END) Dow Jones Newswires
November 11, 2015 19:53 ET (00:53 GMT)
Copyright (c) 2015 Dow Jones & Company, Inc.
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