Lessons from Carl Icahn (Toyin Oguntuyi)

Here’s welcoming you all to a new week in the month of July 2021.

Like I mentioned last week, we will be looking at some money lessons we can learn from renowned activist investor – Carl Icahn.

Carl Icahn is an American who has gained fame and popularity by being an activist investor. According to Investopedia, an activist investor is an individual or group that invests in a company and or obtains seats on the board to effect a major change in the company.

Mr Icahn famously takes large positions in companies he believes are undervalued so he can force changes to boost profitability before offloading a huge chunk. He started out by being a corporate raider before metamorphosing to a shareholder activist. According to him, “I have to look out for the shareholder’s interests and I’m the largest shareholder.”

In 2008, he famously bought a large portion of shares on Yahoo to protest the refusal of its board to accept the $47.5 billion takeover bid from Microsoft (Just imagine that lost opportunity!). In 2012, he bought 10% of Netflix shares when it was at a 52 week low and sold half of that stake for $800 million profit about 8 months later. He has also had public disagreements with numerous boards for actions he considered unfair to their shareholders – one of such being Dell Computers’ decision to take the company private at a price he considered too low.

Below are some of the lessons we can learn from this investor:

  • Invest for value: Carl Icahn believes in not just investing in shares but also understanding the business the company does and paying an ideal price for such investments. He says that the trick in becoming successful is to invest in undervalued assets. Like was mentioned last week, he and the likes of Warren Buffet only invest in businesses they believe in and they famously try not to overpay for these assets.

Many times, many investors follow the crowd and refuse to do the homework of understanding what they are investing in; especially the price point to enter in or purchase. It is important to remember that knowing the ideal purchase price of an asset is a crucial part of investing.

  • Long term investing is the way to go: Like many established investors, Mr. Icahn invests for the long term. He believes that you can invest for the long term whilst being an activist shareholder or active trader. It is just about creating the right balance.

In personal finance, just like life; it is always good to achieve the right balance. A major exercise every investor has to undertake is to periodically check their portfolio to ensure that there is an optimal balance per time. This will go a long way in preventing an “asset rich, cash poor” situation.

  • Popular stocks (or assets or trends) are not necessarily the way to go: Carl Icahn is not a believer of group thinking when investing. He famously invests in shares of companies that are not popular and has been quite successful in that regard. He is of the opinion that following popular trends tend to lead many people to losses and you would agree with me that we have seen this come true over here in Nigeria.

Please remember that the INEC continuous voter registration exercise is still on going. Kindly encourage as people as possible within your circle to register to vote if they are yet to do so. Also note that lost cards can also be replaced; all you have to do is to visit the INEC website for more details.

Till next week, continue to stay safe and do have a fruitful week.

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