Carl Icahn (Trades, Portfolio) has built a fantastic reputation for himself as an investor and trader over the past several decades.
Born in February 1936, the investor started speculating in the market at a relatively young age before moving on to start a niche options business when he saw there was an opportunity in the market.
Since then, he has become a feared corporate raider, taking on some of the world's largest companies to unlock value for shareholders.
He was instrumental in driving Apple Inc. (AAPL, Financial) to increase its shareholder returns. One could argue that his activist campaign against the company helped create the trillion-dollar giant that exists today.
However, as well as being a great American success story, Icahn's investing track record also comes with a cautionary tale.
He owned both Apple and Netflix Inc. (NFLX, Financial) during the first half of the last decade, but sold these companies after generating billion-dollar profits. If he had held onto the positions, his returns would be far more impressive. In fact, I have calculated that by selling out of Apple too early, he missed out on tens of billions of dollars in profits.
Icahn's style of investing has worked for him throughout his career. As his track record shows, there are plenty of ways to make money in the market. Just because he missed out on a couple of trades does not mean we cannot learn anything from this billionaire investor.
A long-term approach
According to the 13F report for Icahn Capital Management, the hedge fund arm of the billionaire's empire, the largest holding in the equity portfolio at the end of 2021 was Icahn Enterprises LP (IEP, Financial).
This is the investor's holding company, which provides capital for the hedge funds as well as owning a range of industrial businesses, including American Railcar Industries (the company took this business private a few years ago).
The second-largest holding, making up 7.4% of assets under management at the end of 2021, was Cheniere Energy Inc. (LNG, Financial). This has been a long-term holding for the hedge fund. The position was first acquired in the second quarter of 2015. The average price paid was around $50 per share.
This company was always a long-term bet. It invested heavily in LNG production facilities and accumulated a lot of debt in the meantime. When Icahn arrived, he kicked out the company's overpaid CEO, who was pressing the management to take on more debt and expand further. Icahn tried to bring in restraint and demanded the company focus on its best projects first.
With the stock trading at $140 today, it seems as if the activist made the right decision. Assuming a purchase price of $50, the stock has returned around 16% per annum since 2015.
The second-largest holding in the equity portfolio aside from Icahn Enterprises at the end of 2021 was Occidental Petroleum Corp. (OXY, Financial). The fund acquired a nearly 90 million-share position in the business in the first quarter of 2020.
Icahn had been fighting the board over its $40 billion acquisition of Anadarko in 2019. He eventually settled with the company's board, and it turns out h recently divested the position.
This was another winning outcome for the billionaire. At the current stock price of $56, the position has returned around 140% annualized.
Overall, Icahn's track record as an investor is not spotless, nor is it as great as other billionaires in the space. It does, however, illustrate how investors can outperform by getting to know the companies they own incredibly well. Icahn is an activist, but he has to know the companies he's taking on to be successful.
This approach has helped him ride out the peaks and troughs of owning companies like Occidental and Cheniere. That is probably the biggest lesson investors can take away from his track record.
