Bill Ackman Sold a Stock That Nearly Doubled - And Bought One Down 42%. Here's Why That Makes Sense

Selling a stock that doubled and buying one cut nearly in half requires a thesis most investors would find uncomfortable. Pershing Square fully exited Alphabet Inc. (NASDAQ:GOOGL) in Q2 2026 after approximately 100% gains and initiated a position in Netflix Inc. (NASDAQ:NFLX), trading 42% below its June 2025 high.

A fund manager rotating out of a company spending $200 billion into one generating free cash flow at 24.7 times earnings is among the hidden signs of financial stability a portfolio can offer, and this is the logic behind the trade.

Alphabet posted negative free cash flow for the first time

Alphabet reported negative free cash flow in the second quarter of 2026, the first time that has happened since the company went public, and raised its 2026 capex guidance to $200 billion, up from $91 billion in 2025, the Motley Fool confirmed. Revenue grew 24% to $120 billion, and GAAP operating income rose 31% to $41 billion, so the top-line story remains strong.

Ackman explained on X on May 16, 2026, that he sold Alphabet to free up cash for Microsoft, a separate Motley Fool analysis reported. Google Cloud grew 82% in the quarter, but the overall negative cash flow profile was the issue.

3.15 million Netflix shares valued at $934 million entered the portfolio

Pershing Square purchased 3.15 million Netflix shares, equal to 4.9% of the portfolio and valued at approximately $934 million as of June 30, 2026, according to Benzinga's filing breakdown.

• Netflix trades at 24.7 times earnings, well below its historical average multiple.
• Wall Street projects 21% annual profit growth over the next three years.
• Median analyst target of $94 implies roughly 20% upside from the recent price near $78.
• Netflix has more than 325 million subscribers, considerably higher than Disney+ and HBO Max combined.

Ackman and CIO Ryan Israel wrote in their Q2 letter that Netflix has "effectively won the streaming wars," adding that AI concerns about content creation "understate the cost of generating long-form, high-quality video," ECIKS reported.

Ackman sold companies spending $500 billion and bought ones that need a brand

TheStreet summarized the rotation as Ackman selling "companies pouring half a trillion dollars into data centers" and buying "companies that mostly need a network, a brand, and a rulebook," referring to Netflix alongside new positions in Visa, Mastercard, and S&P Global.

Heavy AI capex creates future growth but compresses near-term free cash flow. Netflix, Visa, and Mastercard generate high returns on capital without requiring hundreds of billions in infrastructure investment, giving them a different risk profile for investors who rely on cash generation.

Pershing Square expanded from 10 to 14 positions at $19.47 billion

The Q2 13F showed Pershing Square's portfolio value at $19.47 billion across 14 positions, up from 10 in the prior quarter, Seeking Alpha reported. Uber leads at 12.7%, Microsoft at 11.9%, and Meta third at 9.25%. Amazon represents roughly 10% of assets.

Pershing Square raised $5 billion in new capital through April offerings and deployed 85% by mid-June, giving Ackman the firepower to build six new positions simultaneously, ECIKS added.

Ackman lost $400 million on Netflix in 2022 before returning four years later

Pershing Square invested over $1 billion in Netflix in early 2022, then sold at a loss exceeding $400 million after the company reported its first subscriber decline in a decade, according to Quartz. The stock eventually rose roughly 650% from its 2022 lows without Ackman.

Returning to a stock that cost you $400 million four years ago requires either revised conviction or a substantially different entry price. Netflix at 24.7 times earnings and 42% below its peak offers both, and your assessment of the trade may depend on whether you view Ackman's history as a cautionary signal or as evidence that he still sees asymmetric value.

Netflix lost bidding wars for Warner Bros. Discovery and Roku

Netflix shares fell roughly 42% from their June 2025 high after the company lost bidding wars for Warner Bros. Discovery and Roku, with Fox winning the Roku auction, Investing.com reported. Netflix collected a $2.8 billion termination fee from the Warner Bros. Discovery deal but failed to acquire either target, Variety noted.

The failed acquisitions spooked the market, but Ackman appears to view the selloff as a buying opportunity rather than a structural problem. Netflix's content library, pricing power, and largely untapped advertising and live sports opportunities remain intact regardless of whether it owns Roku's hardware platform.

Risks of following a billionaire who lost $400 million on the same stock

Bill Ackman's 2022 Netflix exit remains a cautionary example of conviction that did not survive short-term volatility. A subscriber miss triggered a sale that locked in a $400 million loss, and the stock rallied 650% without him. The risk of repeating that pattern if Netflix disappoints again is not zero.

You may also want to consider that Netflix's streaming market growth of 10% annually through 2030 is respectable but not explosive. At 24.7 times earnings, the valuation assumes steady execution on advertising, live content, and subscriber retention, and any shortfall could compress the multiple further.

Bottom line

Ackman sold Alphabet after a 100% run and negative free cash flow driven by $200 billion in AI capex, then bought Netflix at 42% below its high with 325 million subscribers, 21% projected annual profit growth, and a 24.7 times earnings multiple. The swap reflects a deliberate rotation from capital-heavy AI infrastructure into capital-light business models generating consistent returns.

The swap itself is the lesson, and the side you choose to start investing in next reveals more about your own risk tolerance than any hedge fund filing could. A stock growing revenue 24% while burning cash at record rates sits on one side, and a stock growing earnings 21% at a fraction of the valuation sits on the other. Your portfolio should reflect which outcome you find more reliable over the next three to five years.

This article is for informational purposes only and should not be considered investment advice.

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