Ira Sohn Conference: Carl Icahn's Favorite Stock is Icahn Enterprises

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May 26, 2011
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Carl Icahn began his career on Wall Street in 1961 and has become one of the most well-known and influential investors in America. In 1968, Icahn formed Icahn & Company. As a leading shareholder activist, Icahn believes his efforts have unlocked billions of dollars of shareholder and bondholder value and have improved the competitiveness of American companies. Icahn is a graduate of Princeton University, with a degree in philosophy.

He was told by his father he had no talent. His father was an artist and his mother a musician.

From his talk:

When I did my first takeover I realized what is wrong with this country. What struck me is when I took over a car company in the 1980s, they had great assets. And we could not figure out why they couldn’t make money. There were 12 floors of people but I couldn’t find out what they did.

I brought in a consultant and he came back three weeks later with a full analysis. I said just tell me the short story. And he said I have no idea what they do.

Activism really works. From '96-'04 unleveraged returned 29% per annum, leveraged 52%. Since '04 we took over National Energy along with four other little oil companies. We invested $200 million and sold for $1.5 billion at one company. Philip Services bought them out of bankruptcy at almost nothing and now it is worth $700 million.

We buy minority positions. We come in a lot of times, and it is a bit of a proxy fight. The great advantage I have is that they don’t sue us too much anymore because we don’t cave in.

We try to work with these guys. A lot of board members want to be responsible and want to work with the company, but don’t hold management responsible. If the CEO is running the company well, the board should stay out of it. Because the board will never be able to add value to a great CEO who had decades of experience running a great business. That is the problem with some activists today who try to always improve companies where it is not helpful.

However, bad CEOs who are out playing golf, you tell them that you are going to fire them. I got on the board of Motorola and I helped them.

I think back fondly at all these companies that I helped out over the years.

The fund did well since '04. We were up 125%, even though we had a bad '08. But even with that I felt I had given my word that anyone who wanted to get their money back could. I did not put up gates.

I thought we were going to lose. But ironically it turned out to be great and we did not have to sell any stocks. I did not want to close the fund until we ended on a high note, especially for people who entered at the high in '07.

It hurts me to see a friend lose money, and I feel it is coming again. With the way our country is being run, we have problems coming. It might be a year, two years or more but I feel it coming.

One point I want to make clear is that the New York Times said I was upset with my fund. That is not true. We did pretty well in the fund.

I have to talk about a stock at the presentation; this is my favorite.

The earnings for the first quarter were $2 a share. It has $1 billion in cash and trades at $40 a share. And it has great management, the manager being me!

My agenda if it works out that I want to use these shares as currency for acquisitions. The stock is undervalued so I would not use it for transactions until the share price increased.

It controls Federal Mogul; we brought it out of debt in '05. The CEO has taken out $400 million in costs. It was the only auto company that weathered the storm from the financial crisis.

Icahn Enterprises LP (IEP, Financial) owns 70% of them. It has a lot of opportunities in Asia. There are going to be 35 million cars coming out of Asia by 2015.

Icahn Enterprises purchases large positions and make management accountable.

“I don’t get why Warren Buffett gets a bigger premium than me. Maybe it is because it is older.”

Icahn Enterprises is an investment company, and you can basically get it for free.

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