My wife and I went on a short-lived share-buying spree in August, buying 10 new shares. These consisted of eight FTSE 100 shares, plus two new FTSE 250 shares.
As often happens, my timing could have been better. Hence, I briefly nicknamed myself the Master of Mistiming. From the very next day, the Footsie took a tumble, before bottoming out on Monday, 21 August. Since then, it has rebounded by 2.8%, helping to claw back some of our early losses.
One weird FTSE 100 stock
One stock I was delighted to add to our existing holdings was Pershing Square Holdings (LSE: PSH) shares. This investment trust is almost unique in the FTSE 100, being the UK-listed arm of Pershing Square Capital Management, a large and well-known US hedge fund.
Hedge funds are pooled investment funds employing complex techniques to trade global financial markets. Usually, they gear up (magnify) their returns by using borrowed money and/or financial derivatives. Typically, these alternative investments cater to high net worth individuals, with minimum contributions often above £1m.
Pershing Square Holdings is run by outspoken American fund manager William Ackman. Nicknamed ‘Wild Bill’, Ackman is known for his big, bold, and market-moving bets. Also, he has amassed a personal fortune of around $3.6bn (£2.9bn), according to Forbes magazine.
For example, Ackman turned a $27m investment into a profit of $2.6bn in March 2020 by betting on the collapse of credit markets during the Covid-19 meltdown. Wow.
Pershing Square Holdings has thrashed the FTSE 100
Over the past year, the UK’s FTSE 100 index has risen by a mere 2.5%. Over the same period, Pershing shares have jumped by 6.6%. However, these figures exclude cash dividends, which boost the Footsie’s total return much closer to Pershing’s.
However, over five years, the Footsie has risen by only 2.7%. Meanwhile, this listed hedge fund’s shares have soared by 160%. Again, dividends would boost the FTSE 100’s return, but to nowhere near this level. By my calculations, this makes Pershing the UK index’s best performer over the last 60 months. Nice.
I like the stock
As well as generating market-thrashing capital gains for its shareholders, Pershing shares pay modest quarterly dividends. Here they are for the last five years:
| Year ending | Total dividend |
| 2023 YTD | $39.21 |
| 2022 | $47.50 |
| 2021 | $40 |
| 2020 | $40 |
| 2019 | $40 |
| Total | $206.71 |
With the Pershing share price currently standing at 3,022p, these dividends don’t move the needle that much more. But investors can choose to reinvest this cash payout into yet more shares.
But what’s really crazy to me is that this listed investment trust (valued at £5.7bn) trades at a steep discount to its underlying net asset value (NAV). Right now, this markdown to NAV is around 35%. For such a terrific trust, this looks horribly mispriced to me.
What’s more, the trust is attempting to narrow this discount by buying back its shares in the open market. Over time, by reducing the share base, this should push up the share price — all else being equal, that is.
Finally, my wife bought this FTSE 100 stock last month for 2,989p a share. I’m hopeful this price will be much higher five years from now!
