Bill Ackman’s Bold Bet on Howard Hughes: Berkshire Hathaway 2.0 or a Risky Diversification Gamble?
Bill Ackman, the high-profile activist investor behind Pershing Square, recently made headlines by ramping up his stake in Howard Hughes Holdings (HHH) to nearly 47% with a fresh $900 million investment. His vision? To transform the Houston-based real estate developer, known for master-planned communities, into a diversified holding company reminiscent of Warren Buffett’s Berkshire Hathaway. But JPMorgan’s recent downgrade from overweight to neutral signals growing skepticism about this ambitious pivot.
What’s Changing at Howard Hughes?
Ackman’s plan involves shifting Howard Hughes away from its traditional real estate focus toward acquiring controlling stakes in various public and private companies—insurance being a likely target. This mirrors Berkshire’s strategy: Buffett famously built his empire by acquiring insurance businesses like Geico, which provide a steady float of capital to fuel further investments.
However, JPMorgan analysts, led by Anthony Paolone, caution that this transition muddies the waters for investors. The original investment thesis—betting on strong real estate performance to close the gap between Howard Hughes’ market price and its net asset value (NAV)—is losing ground. The company’s future stock performance will hinge more on the success of these new, potentially unrelated investments rather than its core real estate assets.
Why the Skepticism?
JPMorgan’s downgrade and a 7% cut to the year-end price target (now $76 per share, still 14% above current levels) reflect the uncertainty around Ackman’s strategy. For investors, this means:
- Unclear NAV trajectory: The company may no longer focus on buybacks, asset sales, or other traditional methods to narrow the NAV discount.
- Increased reliance on new investments: The stock’s performance will be tied to the success or failure of these new ventures, which could range from insurance to other industries.
- Execution risk: Transforming a real estate firm into a Berkshire Hathaway-style holding company is complex and fraught with challenges, especially given Howard Hughes’ recent stock decline (down over 13% in 2025).
What Should Investors and Advisors Do?
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Reassess the Risk Profile: Ackman’s vision introduces a new layer of operational and market risk. Investors who bought Howard Hughes for its real estate exposure should reconsider if they are comfortable with the evolving business model.
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Watch for New Acquisitions: The next moves by Pershing Square will be critical. Investors should monitor announcements closely—especially any insurance acquisitions—as these will shape the company’s long-term value proposition.
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Evaluate Diversification Strategy: While diversification can reduce risk, it can also dilute focus. Investors should scrutinize whether Howard Hughes’ management has the expertise to thrive outside real estate or if Ackman’s ambitions might lead to value destruction.
- Consider Alternative Conglomerates: For those seeking a Berkshire Hathaway-like investment, it might be safer to stick with established conglomerates with proven track records rather than betting on a company in transition.
What’s Next?
Ackman’s move is a high-stakes gamble that could pay off if he successfully replicates Buffett’s model. However, it also risks repeating the mistakes of many diversified holding companies that lost investor trust due to unclear strategies and poor execution. According to a recent report from Morningstar, conglomerates without a clear value creation plan have underperformed the broader market by an average of 2-3% annually over the past decade.
At Extreme Investor Network, we believe the key for investors is vigilance and adaptability. Keep a close eye on Howard Hughes’ quarterly reports and strategic announcements. If the company begins to build a credible insurance arm or other high-return businesses, the stock could re-rate significantly. Conversely, failure to execute could lead to further NAV discount widening and share price declines.
Final Thought
Ackman’s vision is bold and potentially transformative, but it’s not without risk. For investors and advisors, the takeaway is clear: don’t buy into the story blindly. Instead, treat Howard Hughes as a dynamic, evolving entity where the investment thesis must be continually reassessed. Diversification is a double-edged sword—only time will tell if Ackman’s bet will carve out a new Berkshire Hathaway or become a cautionary tale in activist investing.
Sources:
- JPMorgan Equity Research, 2025
- Morningstar Conglomerate Performance Report, 2024
- Company filings and investor presentations from Howard Hughes Holdings, 2025
Source: JPMorgan isn’t buying that Ackman will soon create another Berkshire