Bill Ackman commands far too big a premium

Bill Ackman's Pershing Square on August 13 reported a 10% increase in quarterly earnings, to $54 million, from a year earlier, after adjustments for one-time expenses and stock-based compensation. They are the first financial results since the fund's April 26 initial public offering.

During a call with analysts, Ackman argued that his portfolio is attractive because it trades at a discount to the broader market. The stocks in it, however, command a weighted average of about 19 times trailing earnings, compared with roughly 20 times for the S&P 500 Index. His performance doesn't help the uncompelling case either: Pershing Square's fund is down more than 4% this year against a 14% gain for the benchmark.

Stronger returns would, naturally, lift assets and earnings. A new fund or chunky acquisition could help even more. There is little to suggest either one is imminent, however. Instead, Ackman simply stands behind his investing prowess. So far, there's nowhere near enough money where his mouth his.