Value Investing

How Carl Icahn Worked Through The Ranks!

Carl Icahn is a US-based investor who is one of the 50 richest men in the world. He is well-known for his brash style of investing as a corporate raider and as a shareholder activist. He has made his name in the world of investing. This is proved by the use of a specific term “Icahn Lift” when the trajectory of the share price of a company starts going up rapidly when Icahn begins to invest in it!

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Icahn Lift

He has a solid reputation as a tong negotiator and a smart strategist. He often uses his strategic position in companies to exert influence on the business practices of that company, a process known as activist investing.

Carl Icahn had humble beginnings, however, he worked through the ranks to reach where he stands. His efforts and competence has been explained in our Carl Icahn Case study. The book explains Icahn’s path to success in detail.

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“Most investors are aware of Warren Buffett and his investing prowess, but by comparison, Carl Icahn is relatively unknown outside of Wall Street and activist circles. It is widely claimed that Warren Buffett is one of the greatest investors the world has ever seen. Therefore he deserves more attention than Icahn. However, by some measures Icahn has achieved a better return for his shareholders over the years. From 1968 through 2011, Icahn compounded the initial $100,000 he invested in his Wall Street firm at a 31% annual rate. Over the same period, the book value of Buffett’s Berkshire Hathaway grew 20% annualised. Buffett has been able to accumulate more wealth over the years, but Icahn has achieved better returns.

Carl Icahn’s story is completely different to that of other investing legends such as Warren Buffett, Charlie Munger, Ray Dalio or George Soros. While he has made almost all of his money in the equity markets, Icahn’s performance isn’t a result of his unrivalled stock picking acumen. Instead, over the years Icahn has built his wealth through activist activities and corporate raiding, which if executed successfully, leaves nothing to chance. At the end of the day, Icahn almost always walked away from a deal with a profit.

Icahn started his investing journey as a normal investor. But, with time, his strategy morphed towards being an activist investor. They key to his strategy is to move in opposition to those around him, and it has, more often than not, worked in his favour.

This is why the billionaire is such an interesting character to study. With most notable investors, any biographies always focus on their successful stock picking, investment philosophy and attitude towards the market. However, with Icahn, his story is a tale of hard work, getting things done and making money, no matter what it takes.

Carl is fearless and unstoppable. This is what sets him apart, and has helped him grow further beyond others. When everyone is selling, he starts buying and ends up accumulating enough stock to attain a position on the company’s Board. He is known to, then, fire the CEO, or break up the company into many parts and sell it! Yes, reckless!

Tony Robbins profiled Icahn in his 2005 book “Money: Master The Game.” If there’s one thing that comes through from this profile is the fact that Icahn never just looked for opportunities, he made them. There’s one quote from the profile sums up Icahn’s attitude perfectly. When Icahn first joined Princeton, he didn’t have any money to pay for room and board, so he got a job as a beach boy at a club in the Rockaways where he got involved in a regular poker game with the cabana owners.

Icahn told Robbins: “At first I didn’t even know how to play, and they cleaned me out. So I read three books on poker in two weeks, and after that I was 10 times better than any of them. To me, it was a big game, big stakes. Every summer I won about $2,000, which was like $50,000 back in the ’50s.”

That sums up Icahn: he never takes no for an answer. After a brief stint working for someone else on Wall Street, Icahn borrowed money ($400,000 from his uncle M. Elliot Schnall) to buy a seat on the New York Stock Exchange. This is where his career began. Rather than trading stocks, Icahn minted money using a low-risk arbitrage strategy when the odds were always skewed in his favour. This is where he began to “make big money, $1.5 to $2 million a year.”

Thus, it is the never-give-up attitude that led Carl Icahn to his success. He is one of his kind and has strongly worked his way up the ladder. In the process, he has also accumulated many enemies, but his strategy has mostly worked in his favour. He has been on the Boards of big companies like Revlon, Marvel Comics, Time Warner, Herbalife and Netflix.

It was not really his business acumen or the investment strategies that make him rich, famous and successful, but the aggressive attitude and strong determination. Instead of looking for opportunities, he believed in creating them for himself. Undoubtedly, Carl Icahn is one of the most feared and the most respected investors at the same time!