Bill Ackman wants us to remember how a young Warren Buffett took advantage of the 'Great Salad Oil Scandal of 1963'

Bill Ackman wants people to remember salad oil.

In a conference call on Friday defending his stake in Canadian pharmaceutical company Valeant, Ackman recalled an opportunity found by a then-35-year-old hedge fund manager named Warren Buffett after American Express got caught up in the "Great Salad Oil Scandal of 1963."

Ackman, who has lost around $1.76 billion on his position in Valeant this year, said the recent controversy surrounding the company's use of specialty pharmacies - which came to a head after a report issued last week by short-sellers at Citron Research - is a "damaging moment for the company."

Valeant is Ackman's largest holding.

Ackman, however, thinks the company's business remains "quite robust," and went so far as to assert the stock could be worth $448 a share in three years. On Friday, the stock was trading near $100 a share.

But when you're back is against the wall, one of the most trusted strategies for investors is to invoke history. And Ackman, who has been public about his admiration for Buffett's strategies in the past, went on to share a lesson from one of his favorite mentors.

In 1963, a vegetable oil trader named Anthony Di Angelis is swindled 51 companies out of loans that had been backed by supposedly huge holdings of vegetable oil. The tanks purportedly full of vegetable oil, it turned out, were mostly full of water. As a result, De Angelis' loans went bust.

American Express was one of the companies that got caught up in the scandal and in response the stock fell about 50%.

This led an enterprising investor named Warren Buffett to scoop up 5% of the company for around $20 million, an investment that would see him earn a ten-fold return in a decade.

And so with this lesson in mind, Ackman recalled one of Buffett's favorite investing maxims, which he published in The New York Times at the height of the financial crisis in 2008: "Be fearful when others are greedy, and be greedy when others are fearful. And most certainly, fear is now widespread, gripping even seasoned investors."

Certainly, many a Valeant investor is fearful right now, seeing as the stock is off about 60% in just a few months.

Ackman, then, wants to reassure both the investors in his Pershing Square hedge fund and in Valeant more broadly, that the fear surrounding the company is a time not only to remain calm but perhaps even bolster positions in Valeant. Ackman, for his part, has increased his holdings in Valeant recently.

And in a slide, Ackman argued that had American Express done better due diligence, it never would have dealt with Di Angelis in the first place, perhaps as Valeant may never have gotten involved with specialty pharmacy Philidor to begin with. (Valeant announced Friday it would end its relationship with Philidor.)

Of course, the comparison isn't exactly perfect, and we'd note that Buffett wasn't starting his buying of American Express having already lost billions on the company. But we get the idea: Buffett did a thing once, it worked out very well, and maybe it's worth thinking about doing a similar thing now.

In his presentation, Ackman included the following slides, outlining the scandal.

Follow our live coverage of Ackman call here »