Investing Strategies Applied by Carl Icahn
Carl Icahn, one of the all-time corporate raiders was raised in New York. He graduated from Princeton University in 1957 majoring in Philosophy. In 1961 he got his first job in Wall Street as a Stockbroker. But, within a short time in 1968 Carl Icahn launched his own securities firm, “Icahn & Co”. Within 1978 Carl Icahn started to buy entire companies and around 1980 he has earned the reputation as a ruthless corporate raider. He has earned a huge amount of money by using The Leveraged Buyout strategy. Without leverage buyout strategy he would never had the fame and the reputation he has earned. This leveraged buyout strategy was invented in around 1980. The leveraged buyout is buying companies with little money down and stuffing them with debt before exiting with a massive gain. This strategy turned a lot of millionaires to billionaires. Carl Icahn didn’t depend on this strategy only, he used few more strategies those helped him to become so much successful.
Carl Icahn made a hostile takeover on TWA in 1985, which was an airline company that was passing its struggling times in that period. But, Carl Icahn somehow did able to make a profit of around $1 Billion from that deal. Then he sold the assets of TWA Company and repay the debts. After that in 1988 he took TWA in private and managed to make a profit of almost $465 million in next 3 years.
Though Carl Icahn had the reputation as a buyout specialist, he had interest on value investing from his heart. He used to look for those companies which offer values to the investors. Carl Icahn had the specialties to find out and to reach those companies before other investors find out the opportunity. “They call him ‘King Icahn’ for a reason – he’s a legend,” notes Vijay Marolia, MBA, CFP and managing partner of Regal Point Capital in Orlando, Fla. “In essence, Icahn’s a value investor, but he sees value where other value investors don’t,” Marolia said in an interview. “He’s known as a tough negotiator, and you don’t want to go against him. I actually have exited a short position solely because he was on the long side, and he has the money and power to do what he wants to do – including turning a losing company into a profitable one.”
Carl Icahn was also successful in using the merging and acquisition strategy. Whenever he found out the actual value of a company, then he used to remake the company successful again.
Carl Icahn used different strategies in different times depending on the situation and the condition of the companies he was targeting. But, most of the time he used to follow a strategy that helped him a lot. Which is called Activism, it means buying around 50% or more share of a company. Because the management of a company can neglect a shareholder who has small number of share but they can never ignore a Billionaire who has a big number share of that company.
The activism strategy needs a lot of money. So it is not easy for an individual investor. But that doesn’t means that the individual investors cannot learn much from Carl Icahn. As mentioned earlier, he didn’t stick to any single strategy. So investors should study on his strategies and find out which one suits best for what type of investors.