The Greatest Investors: Carl Icahn

Born:	New York City, in 1936
Affiliations:	Icahn & Company (securities firm) Icahn Enterprises L.P. (NYSE:IEP) Icahn Partners (hedge fund) Controlling ownership positions in several major corporations Carl C. Icahn Center for Science at Princeton University
Most Famous For:	The "Icahn Lift." This is the Wall Street catchphrase that describes the upward bounce in a company's stock price that typically happens when Carl Icahn starts buying the stock of a company he believes is poorly managed. Since the mid-1980s, Icahn has had titanic battles with multiple U. S. corporations resulting, most of the time, in significant capital gains for these companies' shareholders and, of course, making Icahn a multibillionaire, whom Forbes ranked as the 46th richest in the world in 2008. Icahn is viewed either as one of history's most ruthless corporate raiders or as a positive force for increased shareholder activism, who seeks to correct the abuses of greedy and/or incompetent corporate management.

Personal Profile
Icahn grew up in a middle-class family in the Far Rockaway section of Queens in New York City. He went to Princeton University on a scholarship and graduated in 1957 with a degree in philosophy. He attended New York University's School of Medicine, but dropped out before graduation, reportedly because he didn't like corpses.
He took an entry level stockbroker's job in New York with Dreyfus & Company in 1961. Seven years later, he bought a seat on the New York Stock Exchange and began his finance career, mostly trading options. However, it didn't take long for Icahn to develop into an activist, pugnacious investor and to begin using ownership positions in publicly held companies to force changes to increase the value of his shares.

Icahn started his corporate raiding activities in earnest in the late 1970s and hit the big leagues with his hostile takeover of TWA in 1985. He was known as an extremely tough negotiator and a clever strategist, whose persistence and personality quirks often distracted his opponents. A string of corporate battles included such names as RJR Nabisco, Texaco, Phillips Petroleum, Western Union, Gulf & Western, Viacom, Revlon, Kerr-McGee, Time Warner and Motorola.

Because of his substantial fortune, Icahn has become a major philanthropist, particularly with donations to his alma mater, Princeton University. Accordingly, he has been the recipient of a number of civic awards for his work and contributions to public health, medical research and education charities in the New York area.

Nevertheless, he is still an active financier. Time Magazine interviewed Icahn on the occasion of his 71^st birthday in February 2007. When he was asked about retirement, he answered, "Well, a number of CEOs have offered to host my retirement party. But I'm just a competitive guy that grew up in Queens. I can't see myself spending the rest of my life in Florida playing golf."

It's reported that Icahn has built a team of two dozen associates to help him find targets and mount his corporate crusades and will likely continue to pursue his investor activism.

Investment Style
Renowned investor Wilbur Ross, Icahn's longtime friend and frequent adversary, referred to Icahn in a May 2007 Fortune Magazine article as "the most competitive person I know … he's especially good at terrorizing people and wearing down their defenses." For many corporate executives, that pretty much sums up Carl Icahn's business operandi and investing style.

Icahn's strategy involves targeting a company he thinks is poorly run and whose stock price is trading below value. He thrives when the markets are on a downtrend; when everyone else is selling, he starts buying. He accumulates enough of an ownership position to lobby for a position on the company's board of directors. Usually his first demand is to dump the CEO and, oftentimes, to consider breaking up the company into separate parts and selling them off. Wall Street professionals say that most of the time he is successful because he's intimidating and relentless. He's viewed as such a surefire moneymaker that investment managers typically start buying up the company's stock, which, whether Icahn is successful or not, leaves him with healthy stock price gains.

A classic example of this phenomenon is Icahn's push in 2006 to oust CEO Richard Parsons and break up Time Warner. It didn't work out that way. When Icahn was asked about his failed attempt in a February 2007 Time Magazine interview, Icahn said "… Dick Parsons agreed to do what we wanted most - a $20 billion buyback of the stock. He did what he promised, and the stock is up 30%. That helps shareholders. Our [hedge] fund made $250 million. It's a nice way to lose."

So how has Icahn's investment style worked out? A 2007 Fortune Magazine profile reported "in its less-than-three-year existence, the Icahn Partners hedge fund has posted annualized gains of 40%; after fees, investors pocketed 28%. That 40% gain trounces the S&P 500's return of around 13%, as well as the 12% for all hedge funds calculated by the HedgeFund.net research firm."

Publications:
"King Icahn" (1993) by Mark Stevens

Icahn Quotes:
"I make money. Nothing wrong with that. That's what I want to do. That's what I'm here to do. That's what I enjoy."

"CEOs are paid for doing a terrible job. If the system wasn't so messed up, guys like me wouldn't make this kind of money."

"When most investors, including the pros, all agree on something, they're usually wrong."