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Friday was a tough weekend for the stock market. of FTSE 100 It fell by 2%, closing over 7,000 points. Although the index fell sharply, there were a few stocks that managed to post positive price gains for the day. He was one of them. Pershing Square Holdings (LSE: PSH ) was up 1.64% on Friday and up 1.45% year-to-date. So should I buy this FTSE 100 stock that is bucking the trend?
Understanding stock price movements
The main reason for the fall in the FTSE 100 last week was the chancellor’s small budget. Although I feel tax and stamp duty cuts are positive for some stocks in the medium term, other UK assets have been affected. For example, the British pound took a hit, falling to its lowest level against the US dollar since 1985. With bond markets also having a bad week, this negative sentiment sent the stock market lower.
Despite this, Pershing Square shares soared. It is indeed a fund with the ability to buy and sell various stocks with very sophisticated financial instruments. According to the half-year report, it recorded a 9.9% gain from interest rate volatility. These derivatives essentially allow fund managers to take a view of future interest rates. You obviously called the move right!
The fund has about half of its investments in US stocks. Although US markets were lower last week, the focus of the decline was the UK. I’m not too surprised that the fund didn’t lose much ground on Friday due to the lack of exposure to UK equities.
Was I going to buy the stock?
Looking at the bigger picture, I think it might be a smart move to buy shares in Pershing Square. I like the unrestricted nature of the fund. It’s not just about investing in stocks. If he has a firm belief in interest rates or other financial assets, he may implement this view. This allows stock prices to outperform even during bear markets.
Although most stock markets around the world have lost ground, this can be seen from one year’s performance, which is positive.
Although I note that this could be taken as a risk. Shorting a stock means losses can balloon quickly. This has been rare in the past, founder Bill Ackman is opposed to some choices.
Additionally, the stock price is currently trading at a steep 35% discount to the asset value. The company commented that it is not happy with this offer. However, it represents a great opportunity for me to step in as a long-term investor. In future years, if this discount is returned to the actual value of the net assets, I would make a profit.
When I have some free cash, I think I’ll buy Pershing Square shares for my portfolio.