While Bill Ackman's holding in Valeant Pharmaceuticals (VRX) attracted investor attention this week, some of his other holdings have been similarly hurt, though less publicly discussed.
Shares of Fannie Mae (FNMA) are down 63% since Ackman presented his case for the government-supported enterprise (GSE) at the Ira Sohn Conference in May 2014. At the time, Ackman said shares could reach $47 a share. Today they trade for $1.59.
In a January letter to Pershing Square investors, Ackman acknowledged that the holdings in his portfolio with the largest "peak-to-trough declines" were Fannie Mae, Valeant, Freddie Mac (FMCC) and Platform Specialty Products (PAH). He said their underperformance could be attributed to having investors who were mostly hedge funds and active managers.
"I have often stated that in order to be a great investor, one needs to first have the confidence to invest without perfect information at a time when others are highly skeptical about the opportunity you are pursuing," Ackman wrote. "This confidence, however, has to be carefully balanced by the humility to recognize when you are wrong."
However, prior to January's letter, Ackman sounded optimistic about Fannie Mae's prospects at CNBC's Delivering Alpha conference in July 2015. Of the intrigue surrounding Fannie Mae and its future, Ackman said the holding represented the "sex and violence" part of his portfolio.
"It offers the most upside and probably has the most downside of anything we own," Ackman said of Fannie Mae at the conference. "The downside outcome is very unlikely."
At the conference, Ackman said Fannie Mae is the only way to have a housing finance system in the U.S. that offers low-cost mortgages for middle-class borrowers, though he advocates for GSE reform.
"I just think this cannot become a precedent where the U.S. government can step in and unilaterally take 100% of the profits of a U.S. corporation forever," Ackman said.
So far, Ackman's view has not come to fruition as the Treasury Department has stated it doesn't support Fannie Mae or Freddie Mac exiting conservatorship without comprehensive housing-finance reform.
Needless to say, Ackman faces another difficult year.
"In 2016, we would like to generate results that reinforce the confidence side of the equation. Humility and skepticism will help get us there," Ackman said in January.
So far, Ackman's skepticism isn't paying off.