There has perhaps been no more mysterious or anomalous banking transaction in recent history than the sale of Wachovia Bank. Its fate remains up in the air as of this writing: Citigroup has sued Wachovia, its board, and rival suitor Wells Fargo, but the parties have agreed to put their litigation temporarily on hold as they try to reach a compromise. (Karen Donovan looks at the litigation here.)

But hedge fund manager Bill Ackman isn't one to let a lack of disclosure keep him from capitalizing on it.

Speaking before a group of investors at the Value Investing Congress today, the Pershing Square Capital manager walked through his reasoning for buying 180 million shares of the bank seven days ago after it announced it would sell most of itself to Citigroup for $2.1 billion in stock.

What it boils down to is the basic tenet of value investing: Wachovia's shares were trading at a level significantly below what Ackman believes the sum of its parts was worth. In fact, if Ackman's math is right, they still look cheap, even after the stock rose on Friday following Wells Fargo's unexpected announcement to buy the entirety of Wachovia Bank. (Felix Salmon wonders why.)

Given that Wachovia never filed the requisite 8-K with the Securities and Exchange Commission after the Citigroup announcement last Monday, Ackman and his team quickly began pulling together their own best guess of what the remaining parts of Wachovia—which included its retail brokerages like its A.G. Edwards unit, the asset management arm Evergreen, and an insurance subsidiary—were worth.

His conclusion? The shares, which traded as low as $1.84 last Monday, were worth somewhere between $7.29 and $19.59 in Ackman's estimation. (The biggest unknown factor is Wachovia's cash balance, which was at $22 billion as of June 30. The low end of his valuation range assumes a $2 billion cash balance.)

In a surprise move, Wells Fargo swept in on Friday with plans to buy the entirety of Wachovia for $6.88 per share, still below what Ackman believes the parts that Citigroup rejected were worth.

Ackman believes that, given the skittishness in the overall market, the fate of Wachovia will have to be resolved quickly. He advocates for the company to be sold in two separate parts instead of as one whole company as Wells Fargo has proposed.

If Citigroup prevails as the buyer of the commercial bank, Ackman believes that what's left would be a great buy for a bank like Morgan Stanley or Goldman Sachs. He can even imagine Berkshire Hathaway scooping it up as an "ideal investment vehicle."

Ackman did sell 9.5 million shares on Friday after the Wells Fargo announcement, but he is still one of the largest shareholders of Wachovia with his remaining stake. He's pleased that a bidding war has developed over the bank, but it's not an outcome he necessarily predicted when he made his investment last week.

Shares of Wachovia were briefly halted during Ackman's speech, which got the crowd buzzing on their BlackBerrys. Just as with everything else connected to this Wachovia sale, no explanation was provided when trading resumed.