Bill Ackman pours up to $3 billion into Howard Hughes insurance arm

Jewish billionaire Bill Ackman just revealed a bold master plan to turn Howard Hughes Holdings, the real estate company known for master-planned communities like Summerlin outside Las Vegas, into a modern Berkshire Hathaway. According to Yahoo Finance, Ackman is directing up to $3 billion into the company's insurance arm, Vantage, building on a $2.1 billion acquisition.

Vantage has a book value of about $1.8 billion, and Howard Hughes plans to feed between $2.5 billion and $3 billion of its excess free cash flow into the unit over the next five years. Following the model set by Warren Buffett, the billionaire head of Berkshire Hathaway, the goal is to invest insurance float into stocks rather than fixed-income bonds to generate superior long-term returns.

Bill Ackman's hedge fund, Pershing Square, will manage Vantage's portfolio for free. Alongside the insurance gambit, Ackman also plans to take in third-party real estate investors and charge management fees similar to Brookfield and Blackstone, the massive alternative asset management firms. Howard Hughes shares recently traded in the high $60s, hovering near the stock's book value of $66.95 per share.

But building a Berkshire style conglomerate takes decades, and results vary; while some insurers like Markel Group have beaten the market, others like David Einhorn's Greenlight Capital have faced struggles. For your portfolio, it means taking a patient look at the hype before jumping into a stock trading right around its book value. Sometimes waiting for the initial excitement to cool down is the best trade of all.