Overview

Our Strategy

Pershing Square USA, Ltd. (NYSE:PSUS) seeks to invest primarily in 12 to 15 free-cash-flow-generative, North American large capitalization growth companies at attractive valuations.

Consistent with Pershing Square’s core investment principles and business strategy, PSUS seeks to invest in high-quality companies that have a number of the characteristics enumerated below:

• Simple, predictable, and free-cash-flow-generative – a proven track record of growth and free cash flow generation, and predictable future financial performance that Pershing Square expects will generate strong, sustainable growth in cash flows over the long term.
• Formidable barriers to entry – long-term sustainable competitive advantages, significant barriers to entry, or “wide moats” around their business, and low risks of disruption due to competition, innovation or new entrants.
• Limited exposure to extrinsic factors – investments that are not materially negatively affected by macroeconomic factors, commodity prices, regulatory risks, interest rate volatility and/or cyclical risk.
• Strong financial position – conservatively financed companies relative to their free-cash-flow generation.
• Minimal capital markets dependency – companies that generally do not need to raise equity capital to fund their businesses.
• Large capitalization – large enterprise values and significant long-term growth potential.
• Attractive valuation – companies at a discount to their intrinsic values with the businesses operated ‘as-is,’ and at a potentially substantially greater discount relative to their value if the businesses were optimized.
• Exceptional management and governance – companies that Pershing Square believes have trustworthy, talented, experienced, and highly competent boards and management teams, and companies where it believes it can be a catalyst for effectuating corporate change through active corporate engagement.

Pershing Square complements its core investment strategy by seeking to identify and execute upon asymmetric hedges in order to protect the investment portfolio against specific macroeconomic risks, and to capitalize on market volatility. Pershing Square typically structures these hedges using asymmetric instruments such as options and credit default swaps, which offer the opportunity for large gains (relative to the individual asymmetric instruments and the size of PSUS’s investment portfolio, taken as a whole) if potential risks occur without exposing PSUS to significant costs or meaningful losses if such risks do not occur as the amount of capital at risk is typically expected to represent a small, single-digit percentage of PSUS’s total assets. Pershing Square has historically, and expects to continue to, reinvest profits from asymmetric hedges during periods of market disruption by increasing its funds’ investments in existing portfolio companies and by occasionally acquiring new positions, taking advantage of the depressed valuations of common stocks that typically occur during market disruptions. Pershing Square’s opportunistic hedging strategy has allowed it to increase its funds’ exposure to high-quality companies at materially discounted valuations, which it believes leads to long-term investment performance. Pershing Square believes its opportunistic hedging strategy is highly synergistic to its core investment strategy and is a superior alternative to holding a large cash position or maintaining a continuous hedging program, which can be a significant drag on long-term performance.