Outspoken Guru Carl Icahn Is ‘Driven To Excel’
Thu Oct 23 2014
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Outspoken Guru Carl Icahn Is ‘Driven To Excel’

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“I have to look out for the shareholder’s interests, and I’m the largest shareholder.” – Carl Icahn (Trades, Portfolio)

It can be said of nearly every guru we follow at GuruFocus that they are self-made – and that is true of each to varying degrees – but activist investor Carl Icahn (Trades, Portfolio) really is a self-made man. Spectacularly so, in fact.

At the age of 78, Icahn’s wealth is estimated to be in excess of $ 25 billion. Those who knew him early in his life probably had no idea where it would take him.

“I was always driven to excel,” Icahn has said.

His father wanted to be an opera singer, but that didn’t work out, so he settled for work as a substitute teacher. His mother also was a teacher. From that rather modest start, Icahn went on to earn a bachelor’s degree in philosophy from a prestigious Ivy League school, Princeton University.

Given his background, one might have expected Icahn to follow in the footsteps of his father, who was a cantor before deciding to go into education; instead, he embarked on a career on Wall Street a few years after his college graduation in 1957.

Since founding a securities firm – Icahn & Co. – in 1968, Icahn acquired significant holdings in now-defunct companies (TWA, RJR Nabisco, Gulf+Western, Uniroyal, Marshall Field’s, Blockbuster, Kerr-McGee and Motorola); companies that are still in operation but are not traded publicly today (Texaco); businesses that are now subsidiaries of other companies (Marvel Comics, Imclone and Fairmont Hotels and Resorts); companies that have merged with other companies (Phillips Petroleum and American Can Co.), and companies that are still publicly traded, like Western Union (WU), Viacom (VIA), U.S. Steel (X), Revlon (REV),Federal-Mogul (FDML), Time Warner Inc. (TWX) and Herbalife (HLF).

It was his takeover of TWA in 1985 that earned Icahn a reputation as a “corporate raider.” Long controlled by Howard Hughes, TWA was acquired by Icahn in the wake of the Airline Deregulation Act of 1978, and Icahn sold off TWA’s assets to pay a debt he used to purchase it. Consequently, TWA struggled with a debt of more than half a billion dollars and filed for bankruptcy three times before merging with American Airlines in 2001.

He’s made other takeover bids in the last 30 years. Some were successful; others were not. But he’s been successful often enough that most investors pay attention to what he says and does. They can’t afford not to – and Icahn can be pretty outspoken.

In recent weeks, Icahn has:

  • Told CNBC he believes the high-yield “junk” bond market is “in a bubble.”
  • Said that he thinks Apple (AAPL) stock should be trading at more than double its current price.

  • Told Bloomberg TV that he thinks guru Warren Buffett (Trades, Portfolio) is “too easy” on some companies.

Another guru, Michael Dell (Trades, Portfolio), asserted recently that Icahn is “a bad guy.”

“He lies, he has no ethical boundaries, he’ll say anything, do anything, I have no time for him,” Dell said.

Others, though, make time to listen to what he says, regardless of what they may think of him. Last month, eBay (EBAY) announced that it would spin off subsidiary PayPal next year. PayPal, an e-commerce company, is currently private but will be traded separately, something Icahn had been encouraging.

Following eBay’s announcement, the price of the company’s stock went up $ 6. Icahn owns more than 30 million shares in eBay so he made $ 180 million.

Icahn’s wheeling and dealing doesn’t always pay off, though. Last week, Icahn lost $ 200 million overnight on Netflix (NFLX) stock after Netflix reported lower-than-expected subscriber growth in its third-quarter earnings. In after-hours trading, Netflix stock lost 27% of its value.

“My opinion is that, philosophically, I’m doing the right thing in trying to shake up some of these managements,” Icahn has said. “It’s a problem in America today that we are not nearly as productive as we should be. That’s why we have the balance-of-payments problems. It’s like the fall of Rome, when half the population was on the dole.”

About the author:

I’m a journalist by training. I grew up in Arkansas and earned my B.A. at the University of Arkansas. I earned my master’s degree at the University of North Texas. My background includes stints at newspapers in Arkansas and Texas and teaching news writing and news editing to students at the University of Oklahoma and Richland College here in Dallas. I’m the editorial manager at GuruFocus.


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