Thursday, January 3, 2013

Why Investors should not Ignore Carl Icahn

Carl Icahn is a billionaire investor who invests in companies and sometimes also manages them. Yet most of his companies - or rather companies in which he has invested - trade at discounts to their book values and despite his wealth and ability to gobble up companies Icahn does not command the respect that another well-known investors does - Warren Buffet.
Kiplinger has an interesting piece on this phenomenon written by Andrew Feinberg, who runs a hedge fund.
Buffet's stock picks trade at premium partly due to the reputation of the man himself. Investors feel that if Buffet has the stock, it must be worthwhile to possess it.
According to Feinberg, investors should see the discount at which Icahn's stocks are trading as a good investment opportunity.
Feinberg says, "Icahn, 76, is arguably one of the great value investors of all time, and by one key measure may be an even better investor than Buffett. From 1968 through 2011, Icahn compounded the initial $100,000 he invested in his Wall Street firm at a 31% annual rate. Over the same period, the book value of Buffett's Berkshire Hathaway grew 20 percent annualized."
Icahn' returns from his investments have also been extraordinary, Feinberg's research showed. "An annualized 26.1 percent through June 30, compared with 7.3 percent for Standard & Poor's 500-stock index, according to the 13D Monitor, a research service. This is a crucial number for investors because it means they can successfully piggyback on Icahn's investments. For example, on January 13, 2012, Icahn filed a 13D on CVR Energy, with the stock at $23. On November 30, 2012, it closed at $46.
Warren Buffet is, of course, a household name and known even to individual investors and non-investors. However Icahn can lay equal claim to fame and it would be worthwhile for investors to monitor his stocks in the New Year.

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