Carl Icahn (Trades, Portfolio) was one of the most successful investors of the last century. Unlike many other Wall Street elites, Icahn, who grew up in Queens, could not tap wealthy family members and friends to start his career. Instead, he started working on Wall Street as a stockbroker in 1961. From there, he built up a succession of businesses and became known as a corporate raider in the 1970s and 80s.
This aggressive investment style has attracted plenty of criticism in the past, but whatever one thinks of corporate raiders and activist investors, one cannot deny that Icahn's ventures were incredibly successful. Today, he invests primarily through his holding company, Icahn Enterprises, which has a market capitalization of $14.2 billion.
Investing in hard assets
Icahn's investing activities in the 70s and 80s have been well covered. His recent investment activity attracts less attention, which may be because his performance has deteriorated during the past few years.
Looking at the portfolio of Icahn Capital Management and Icahn Enterprises (IEP, Financial) provides some idea of why the billionaire activist investor has performed so poorly recently.
Icahn Capital Management owns $13 billion worth of shares in Icahn Enterprises, making it the largest investor in the holding company. So for the purpose of this article, I will be referring to Icahn Capital's portfolio as a proxy for all of the business holdings across the two entities.
It appears as if Ichan and his team prefer hard assets, or what some might call the old world businesses. Some of the largest private businesses owned across the conglomerate include American Railcar Industries, the railcar leasing company. It also owns a chain of vehicle repair and automotive systems businesses.
The top public equity holdings include CVR Energy Inc (CVI, Financial), Cheniere Energy Inc (LNG, Financial) and Occidental Petroleum (OXY, Financial). Overall, Icahn has around $4 billion invested in these companies, and the group is the majority owner in CVR.
What is really fascinating is the fact that Icahn has actually owned some of the best-performing tech investments in his portfolio during the past decade, but he hasn't held on to them.
Tech investments
In the third quarter of 2015, Icahn acquired 46 million shares in PayPal (PYPL, Financial), giving it a 5.2% portfolio weight in the equity portfolio. The investment group paid an average purchase price of $31 for the stock. The position was sold between the fourth quarter of 2017 and the first quarter of 2018. Today it is changing hands at over $260.
In the third quarter of 2013, Icahn made Apple (AAPL, Financial) one of his most significant holdings. He eventually acquired 211 million shares, giving it a 12% portfolio weighting at an average price of $19. Today the stock is trading at $142. Icahn sold the holding in 2016.
The investor also owned nearly 40 million shares in Netflix Inc (NFLX, Financial) at an average price of around $30. This position was also sold in 2015. If Icahn had held the position, he would be sitting on gains today of more than 2,000%.
Lessons learned
Investors can learn a lot from this approach. I'm not going to say that the value investor is not a buy-and-hold investor. He is. He has owned positions in American Railcar and CVI for over a decade.
Icahn is a long-term investor, but he may have been too trigger-happy in taking profits with the above holdings. This may have been because he did not understand the businesses' competitive advantages or the market potential. He might have a better insight into railcars and oil and gas markets than electronic payments.
Whatever the reason it is that he sold, with the benefit of hindsight, it looks as if he made a mistake. Other investors may be able to avoid the same mistake by holding on to winning stocks as long as they understand why they are performing so well.
