Pershing Square swoops on '800-pound gorilla' Amazon after tariff hit

Billionaire investor Bill Ackman’s £7.13bn Pershing Square (PSH ) has bought e-commerce behemoth Amazon in an unusually active first quarter. 

The new addition to the high-conviction portfolio of North American stocks was funded by the trust trimming Universal Music and selling out of Canadian Pacific, which runs a rail network in North America and was deemed particularly tariff sensitive, over the period.

In a first quarter earnings call, chief investment officer Ryan Israel explained that Amazon had been on the trust’s ‘to buy’ list for ‘many years’ but had not been priced right. After the Trump administration announced a slew of swingeing tariffs in April, Amazon’s share price took a more than 30% hit, trading at ‘the lowest multiple we’ve seen ever since we started following the company’, said Israel. 

At this point, managers felt the company was ‘uniquely attractive’ and had cash on hand to make a quick deal. 

Israel spoke particularly favourably about Amazon Web Services (AWS), the cloud computing side of the business. 

‘AWS is leading the technological revolution as artificial intelligence (AI) and computer services are moving off of a lot of companies’ work sites and into what they call the cloud, or large data servicesm,’ he said. 

‘It’s cheaper than what they can do, much more reliable and faster.’ 

He added that ‘less than 20%’ of all IT workloads are in the cloud today, forecasting that going forward this will be ‘as much as 80%’, defining the large opportunity for AWS.

Israel called Amazon the ‘800 pound gorilla’ in the space, noting ‘there’s only three players and [Amazon] has over a 40% market share, so we think the future is incredibly bright for that business’.

While Amazon has long been sitting on Pershing’s ‘buy’ list, the fund has had reservations about the stock as recently as this year. 

When Amazon was trading at an all-time high in February this year, PSH had concerns about its cloud operations due to the unexpected success of DeepSeek in China and related questions around ‘the sustainability of AI.’

However, Israel is confident the company will be able to ‘work through any slowdown in the AWS’ and furthermore did not believe that ‘tariffs would have a material impact on the earnings in the retail business as well’, leaving Amazon on track to ‘continuing its plus 20% earnings per share growth’.

PSH also acquired a stake in Uber and added to holdings in Brookfield and Hertz over the period. 

‘We’re off to a good start’ 

Reporting a share price return of 14.3% in the three months to 27 May, outperforming the S&P 500, Ackman told investors ‘we’re off to a good start’. 

The manager has recently drawn media attention for comparing his mission to transform Texas real estate developer Howard Hughes into a diversified holding company, to the creation of a ‘modern-day Berkshire Hathaway.’

Pershing Square management invested $900m into Howard Hughes ealrier this year, upping its stake from around 38% to up to 69%. 

The move represents a change from Ackman’s typical strategy of buying minority stakes in listed companies and, all going well, could see Pershing Square transform into a large financial group. 

Ackman confirmed the ‘very big premium’ he paid for the shares, at $100 per share for the $66 stock, and said the first initiative for Howard Hughes would be to build an insurance operation in the style of his hero Warren Buffett. 

He revealed PSH initially considered taking the company private but ‘couldn’t find the capital’ needed to do so on a long-term basis. He also shared hopes that the company in its new form ‘will attract a much broader investor base’, admitting ‘there’s a very small contingent of people prepared to own a pure play real estate developer’. 

Ackman, who voted for Donald Trump in 2016 and backed his second campaign but has publicly declaimed tariffs, referring to the president’s ‘shock and awe’ approach on the call, also touched on the 90-day tariff pause, praising the decision to reverse the initial levies, leading to ‘a better path’ for global markets. 

He added that being composed to withstand ‘extrinsic factors outside of our control’ and pitched to long term investors, PSH’s portfolio should be ‘relatively immune’ to further hikes.