GuruFocus readers several weeks ago nominated gurus who in their mind best navigated the unique circumstances of 2013. With 34.7% of total votes cast, they have now picked Carl Icahn as GuruFocus Guru of the Year. The multi-approach investor stole the spotlight this year, launching a number of high-stakes and highly publicized maneuvers. As second, readers ranked Warren Buffett’s two new managers at Berkshire Hathaway (BRK.A)(BRK.B), Todd Combs and Ted Weschler, with 24.2% of votes. Following them are David Tepper (18.6%), Bruce Berkowitz (17.3%) and David Einhorn (5.2%).
Icahn invests through three vehicles: two hedge funds, Icahn Partners and Icahn Management LP, and a private equity firm, American Real Estate Partners. Over the past decade, he returned on average annually 20%.
Icahn’s stock portfolio, valued at $24.6 billion, is diversified among a variety of sectors: industrials, energy, consumer capital, technology and health care. He also holds large, activist stakes in several companies, including Nuance Technologies (NUAN), Talisman Energy (TLM), Hologic Inc. (HOLX), Transocean Ltd. (RIG) and Netflix (NFLX).
In decades past, the investor became known for strong arming companies into making changes. His approach has softened somewhat, though he made his mark on several companies this year that he felt were not serving shareholders to their fullest. In March, he famously attempted (and ultimately failed) to save Dell (DELL) investors from what he believed was a low-ball offer from its founder, Michael Dell, to take the company private. He also for several months ending in November battled (successfully) for Transocean (RIG)’s board to increase its dividend to $3 and reduce its number of board seats.
Perhaps most notable of Icahn’s escapades this year, in December he pressured Apple (AAPL) CEO Tim Cook to return $50 billion to shareholders in the form of share buybacks. For months this year, he also insisted the company raise its dividend.
In a stroke of genius on the open market, Icahn joined George Soros early in the year in making a long bet in favor of Herbalife (HLF), just after Bill Ackman made a public short case against the company, imploding its stock. Year to date, Herbalife stock has soared 168%. In August, Icahn told Fox news he ultimately realized a $500 million profit on the position.
Going forward, Icahn sees an unfavorable environment for stocks. He told Reuters in November: "I am very cautious on equities today. This market could easily have a big drop… Very simplistically put, a lot of the earnings are a mirage. They are not coming because the companies are well run but because of low interest rates."
However, the outlook for his brand of activism holds more promise, in his view, as he said through Icahn Enterprises in November:
“Most importantly to current IEP unit holders is that in my opinion there has never been a better time than today for activist investing, if practiced properly. Several factors are responsible for this: 1) extremely low interest rates, which make acquisitions much less costly and therefore much more attractive, and 2) the current awareness by many institutional investors that the prevalence of mediocre top management and non-caring boards at many of America's companies must be dealt with if we are ever going to end high unemployment and be able to compete in world markets. I believe that the greatly increasing need for a catalyst to make acquisitions possible and to make mediocre managements accountable will be of meaningful benefit to IEP in future years. As a corollary, I expect that low interest rates will greatly increase the ability of the companies IEP controls to make judicious, friendly or not so friendly, acquisitions.”
He also reminded investors, “An investment in IEP stock made at the beginning of 2000 has increased by approximately 1,500%, or an average annual return of 22%, through October 31, 2013.”
See Carl Icahn’s portfolio here.
Not a Premium Member of GuruFocus? Try it free for 7 days here!
Continue Reading »