Legendary investor Carl Icahn is the special guest on Wall Street Week Episode 3. He talks about his childhood, poker, his medical career, how he’s hedging for a market correction, activist investing, Apple $AAPL and President Obama.
Carl Icahn summary via Wall Street Week below
Icahn grew up in a lower middle class household in a gritty section of Far Rockaway, Queens, New York. He demonstrated entrepreneurial instincts early in life, working as an industrious cabana boy to pay for his room and board at Princeton after his father agreed only to cover the cost of tuition.
While in high school he was also invited to join in on high-stakes poker games with the wealthy men he tended to at the beach club. After experiencing painful early losses at the poker tables, Icahn, after poring over books on mathematical poker strategy, quickly turned those games into a considerable source of income. He credits those early poker experiences with teaching him a valuable lesson – “in big business and big poker, there are no nice guys.”
Icahn’s parents placed great value on the performing arts, and due to his lack of talent in those areas Icahn was encouraged to do the only sensible alternative – become a doctor. While in medical school, a close brush with an ill tuberculosis patient convinced Icahn that medicine did not suit him. He promptly walked out of the hospital that day directly across the street to, against the wishes of his family, join the Army. After completing his service, Icahn began to venture into the world of Wall Street.
He worked as an options agent for Dreyfus & Company in the early 1960s and built up a large enterprise. In addition to gaining a loyal following, he enjoyed early personal investing success thanks to a raging bull market. However, when his newly amassed fortune was wiped out during a steep market correction, Icahn learned another valuable lesson – “don’t confuse a bull market for brains.”
The growth of Icahn’s reputation and fortune accelerated in the 1980s as he became one of the first prominent activist investors who worked to unlock value for shareholders. His brand of activist investing generally involves acquiring a large stake in a company to gains seats on the board of directors and then rolling-out a turnaround strategy that includes some combination of strategic mergers and acquisitions, spin-offs, capital structure alterations, management changes, cost-cutting and share buy-backs.
Carl Icahn is a value investor who is able to see deep hidden value in “cigar butt” companies that are often poorly run. He is known to rail against the complacency and ineptitude of many corporate CEOs, who he believes often ascend to their position due to skillful political maneuvering rather than genuine creativity or intellect.
Due to his knack for consistently delivering large returns on investment, a phenomenon developed known as the “Icahn lift,”, where upon news that he had bought shares in a stock, that stock’s price would immediately move higher. The list of companies that Icahn has rehabilitated with great success is long, and most recently Icahn he has enjoyed large and highly-publicized gains in stocks like Netflix (NFLX) and Apple (AAPL).
Carl Icahn has also founded and been involved with a significant number of charitable causes, including the Icahn Charitable Foundation, Foundation for a Greater Opportunity, Children’s Rescue Fund, and Icahn Scholars Program at Choate Rosemary Hall.