Key Points
Ackman's decision to buy Microsoft in Q1 was similar to his decision to purchase Alphabet stock in early 2023.
His pattern is to invest in stocks when they're valued attractively relative to their growth prospects.
Ackman knows that sometimes you have to sell a great stock to capitalize on an even better opportunity.
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It's 13F season. Many of the world's greatest investors recently revealed the stocks they bought and sold in the first quarter of 2026. Billionaire Bill Ackman is one of them.
Ackman dumped most of his hedge fund's position in Google parent Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL) in Q1. He redeployed the money, though, in large part to load up on another top AI stock -- Microsoft (NASDAQ: MSFT). And there's a pattern with his moves that every investor should study.
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Following a pattern
Let's go back to when Ackman first initiated a position in Alphabet in 2023. OpenAI had launched ChatGPT several months earlier. Google stumbled in the rollout of its rival AI model. Its shares sank. Ackman saw an opportunity to buy a great stock at a discount and began loading up on Alphabet. Since then, his initial investment has roughly quadrupled in value.
There are distinct similarities with Ackman's recent purchase of Microsoft. Shares of the software giant declined sharply in the first quarter of 2026. Some investors lumped Microsoft in with other SaaS stocks during the major sell-off dubbed the "SaaSpocalypse." Others questioned the wisdom of Microsoft's significant increase in AI infrastructure investments. Again, Ackman saw an opportunity.
Did the billionaire investor sour on Alphabet's prospects? Not at all. He posted on X (formerly Twitter):
To be clear, our sale of $GOOG was not a bet against the company. We are very bullish long term on Alphabet. But at current valuations and in light of our finite capital base, we used $GOOG as a source of funds for $MSFT. https://t.co/0ePZI8p3Bh
-- Bill Ackman (@BillAckman) May 16, 2026
Note two key points in that tweet. First, Ackman pointed out that his hedge fund, Pershing Square Capital Management, has a "finite capital base." Second, he focused on valuations. Ackman wrote that his fund was able to buy Microsoft "at a valuation of 21 times forward earnings, broadly in line with the market multiple and well below Microsoft's trading average over the last few years."
The lessons for investors who aren't billionaires
Should other investors sell Alphabet stock and aggressively buy Microsoft because Ackman did? Absolutely not. However, there are some important lessons to learn from the billionaire's moves.
First, like Ackman and his hedge fund, we all have a finite amount of money to invest. The question investors should continually ask is, "What's the best way to deploy the money to generate the highest returns?" Sometimes, that means selling a very good stock to buy an even better one.
Second, investors should always factor in the risk and margin of safety associated with any stock. Ackman determined that Microsoft had a greater margin of safety at its depressed valuation than Alphabet.
Third, the stock market often creates opportunities to buy when prices don't accurately reflect a company's growth prospects. Be ready to capitalize on these opportunities when they arise, even if you have to sell a great stock to have enough cash to deploy. Even billionaires face this scenario from time to time.
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Keith Speights has positions in Alphabet and Microsoft. The Motley Fool has positions in and recommends Alphabet and Microsoft. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
