He’s often controversial… and usually pretty brash. But Pershing Square’s Bill Ackman is also usually quite insightful. He’s been at this game a long time, and he’s had his share of big wins… and big losses. Ackman has an ego on him. (What hedge fund manager doesn’t?) But he’s also his own biggest critics, and like all good investors he learns from his mistakes.

Today, let’s take a look at Ackman’s latest letter to investors, which came out last week. Ackman, like a lot of hedgies, had a terrible 2015. Here were some of his takeaways:

Not All Valuation Metrics are Equal

Ackman bet big on Valeant Pharmaceuticals (VRX)… and lost big when the stock rolled over. Per Ackman,

Principally, we missed the opportunity to trim or sell outright certain positions that approached our estimate of intrinsic value. Our biggest valuation error was assigning too much value to the so-called “platform value” in certain of our holdings. We believe that “platform value” is real, but, as we have been painfully reminded, it is a much more ephemeral form of value than pharmaceutical products, operating businesses, real estate, or other assets as it depends on access to low-cost capital, uniquely talented members of management, and the pricing environment for transactions. [Emphasis Sizemore]

Charles here. I learned a similar lesson in 2015. Just as Ackman lost money in an acquisition-hungry pharma stock, I lost money in MLPs, small-cap REITs and business development companies — three sectors that would normally have very little in common. But the tie that bound them was their dependence on the capital markets for fresh funding. When the credit markets got skittish, Mr. Market relentlessly punished these sectors, and two of my holdings — Kinder Morgan (KMI) and Teekay (TK) were forced to slash their dividends.