UPDATE 1-Bill Ackman says short-term money driving market volatility

Tue Oct 6, 2015 5:38pm EDT
 
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(Adds more comments from Ackman, views on politics, paragraphs 3-8)

By Edward Krudy

NEW YORK Oct 6 (Reuters) - William Ackman, head of hedge fund firm Pershing Square Capital Management, said on Tuesday that financial market volatility was being driven by short-term money without regard to long-term economic fundamentals and that Valeant Pharmaceuticals International Inc was the most undervalued stock among his top holdings.

"There is a huge amount of money that moves without regard to long-term economic fundamentals," said Ackman at a Bloomberg investor conference in New York. Ackman added that the volatility was creating opportunities for long-term fundamental investors looking to pick up undervalued stocks.

Ackman cited leveraged exchange traded funds, or ETFs, high-frequency trading and other types of leveraged strategies as factors that have contributed to market volatility. That has compounded investors' fears and led to more selling in markets, he said.

Pershing Square Holdings fund is nursing a 12.6 percent loss for 2015, an investor who received Ackman's investment letter said last week, marking a dramatic reversal of fortune for one of last year's best performing managers.

Shares in Valeant Pharmaceuticals, one of Ackaman's largest holdings, tumbled after Democratic lawmakers attacked "massive" price increases of two heart drugs by the company, fueling a rout in drugmaker shares on worries of a government and insurer clampdown on U.S. drug prices.

Ackman said the comments had not changed his view on the sector. However, while he believed Valeant was the most undervalued stock in his top holding his fund had not been adding to its position in the company.

Ackman also weighed in on politics, saying he believes Michael Bloomberg, a three-time mayor of New York and founder of the financial news and data company Bloomberg, would run for president in 2016 and win.

"I would do everything in my power to get this guy elected," Ackman said. "I think the stock market would be up 5 percent the day he announced and 10 percent when he wins." (Reporting by Edward Krudy; Editing by Meredith Mazzilli and David Gregorio)