Bill Ackman Drives a Tesla: Here's Why He Won't Buy the Stock

Bill Ackman has made it clear: He wants to be the next Warren Buffett. That's easier said than done, to be sure. But the fund manager in charge of Pershing Square has revamped his investment style since his activist days and runs a concentrated portfolio of long-term, mostly passive holdings.

So, it's no surprise that Ackman's investment decisions are rooted in the same investment philosophy as Warren Buffett's. That said, Ackman has notably invested in one area Buffett historically avoided: technology stocks. Some of Ackman's largest holdings are the big tech stocks Amazon, Microsoft, and Meta Platforms. When asked why Ackman is interested in those companies but not other members of the "Magnificent Seven," such as Tesla (NASDAQ: TSLA), Ackman's response echoed wisdom shared by Buffett over the years.

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Ackman likes Tesla's products and has a lot of respect for its CEO, Elon Musk. Ackman even said in a recent interview that he drives a Tesla. But Tesla's stock has become detached from the current product it sells: the car that Ackman, who can purchase any car he likes, has chosen to use.

"To own Tesla at today's valuation, you have to make some grand assumptions about robotics and other things that they're going to achieve over time," Ackman said. "Our portfolio is comprised of businesses where we, with a very high degree of confidence, can predict the cash flows over a very long period of time. I think it's very hard to do that with Tesla."

Tesla's stock currently trades for over 200 times forward earnings estimates. It's an automaker trading at 15 times sales, while other car companies trade at sales multiples below 1. While its vehicle deliveries are growing about 10% year over year and expected to continue doing so through 2030, that's far from justifying the enormous multiples on the stock.

Indeed, Tesla is a $1.5 trillion company because investors expect it to earn tremendous profits from developing autonomous vehicles and humanoid robots in the future. The vast majority of bull cases for Tesla, such as Ark Invest's valuation, stem from its fledgling robotaxi efforts. And now Musk is dedicating a significant amount of Tesla's manufacturing capacity to its humanoid robot, Optimus, which is a massive bet on labor disruption.