Is Bill Ackman's Air Products Helium Bet Full of Hot Air?

Garrett Baldwin

Bill Ackman is trying to find a winner. Over the past two weeks, Wall Street kept its eye on one of richest and shrewdest hedge fund managers in the game.

Speculation about his target increased as he informed investors that he was seeking to make another splash in an "undervalued" company. And he certainly did, his biggest splash ever.

Ackman's recent $2.2 billion stake in Air Products & Chemicals Inc. (NYSE: APD) is certainly a buoyant pick. His Pershing Square Capital Management acquired a 9.8% stake in the industrial gas company, which is also the world's largest producer of helium and hydrogen.

It was a lofty bet by Ackman, who had garnered attention for a quiet accumulation of $1 billion in recent weeks. Earlier this month, Ackman told investors that he was specifically targeting a large-capitalization, investment-grade company with a lot of upside.

The purchase of APD could prove to be even shrewder, if Congress is unable to address the looming shortage of helium, a critical industrial gas in the production of MRI machines, semiconductors, aerospace equipment and lasers.

And Ackman can profit as demand continues to surge around the world.

Money Morning's David Zeiler told the story last year of a helium shortage.

But Ackman's bet on Air Products and what is or isn't happening in Congress have made the entire situation even stranger… and likely far more profitable for wise investors.

How Bill Ackman Got His Fill of Hot Air

The $2.2 billion stake is the largest bet ever for Ackman, who has struggled publicly since 2012. After losing a very combative $1 billion bet against Carl Icahn over Herbalife Ltd. (NYSE: HLF), and his bet on retailer J.C. Penney Company Inc. (NYSE: JCP) turned riches into rags, Ackman needs a big winner.

Shares of Air Products have been very flat against the performance of the S&P for several years. But things started to change just a few months ago as the company's shares have increased by 30%.

What drove the stock inflation?

Air Products is the world's largest producer of helium. The industrial gas industry has seen its profits move higher over the past year as a shortage of helium is looming. According to reports, the steady global increase in helium consumption means the world could run out of the gas in as few as 25 years.

What's driving the shortage? Congress in 1996 enacted a law that essentially drove helium prices into the ground and eliminated any incentives to produce more. The Bush Dome Federal Helium Reserve will shut down as mandated under the Helium Privatization Act of 1996.

Just How Shrewd Is Bill Ackman?

Ackman's bet could center on the fact that Congress now has only 30 days to pass a new law authorizing helium sales from the U.S. strategic helium reserve for another year before such authority expires.

Garrett Baldwin

About the Author

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Garrett Baldwin is a globally recognized research economist, financial writer, and consultant with degrees from Northwestern, Johns Hopkins, Purdue, and Indiana University. He is a seasoned financial and political risk analyst, with a focus on stocks, hedge funds, private equity, blockchain, and housing policy. He has conducted risk assessment projects for clients in 27 countries, and consulted on policy and financial operations for some of the nation's largest financial institutions, including a $1.5 trillion credit fund, a $43 billion credit and auto loan giant, as well as two of the largest Wall Street banks by assets under management.

Garrett joined Money Map Press as an economist and researcher in 2011, specializing in alternative strategies with an emphasis on fundamental and technical analysis.

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