A profile on activist investor Bill Ackman in Chief Investment Officer focuses on how he discovers his targets and makes a profit. Among the group of top star activists, Ackman might just be the most daring, with a roller-coaster of forays into the likes of Canadian Pacific (high) and Herbalife (low).

In 2004 he founded Pershing Square Capital Management, which maintains a batch of long positions in companies such as Hilton, Lowe’s, and Chipotle. But the fattest returns have come from activist investing, which the article explores.

In 2002, Ackman used a tip from a Lehman Brothers salesman that pointed him to MBIA as being in a precarious position due to the company’s insistence on insuring bonds and running structured finance plays with little capital. Though it took 6 years, his prediction paid off and Pershing made $1.1 billion when MBIA collapsed in 2008.

When Ackman heard that Canadian Pacific was the worst-run railroad in North American, he amassed a 14% stake in the railroad and won a proxy fight in 2012 that gave him control of the board. By the time he exited, his investment had expanded fourfold, and CP’s stock has continued to rise.

However, Ackman’s forays into Herbalife cost him a reported $1 billion and his wager on Valiant Pharmaceuticals reportedly cost him at least $2.8 billion, though he calls the latter “a good lesson.” Most recently, Pershing scored big in the pandemic’s initial days due to internal analysis that led them to use a hedging strategy with credit default swaps. The hedges generated $2.6 billion in proceeds.

Ackman has come out ahead, even while acknowledging that he and Pershing would always make mistakes. That article concludes with a quote from Ackman: “When I first started in business, I didn’t know when it was time to move on,” he has said. “But I learned a lot about what I call the return-on-invested-brain-damage calculation. If the return isn’t high enough to justify the brain damage, I won’t spend the time.”