At BillionairesPortfolio.com, we’ve studied the track records of hundreds of billionaire investors and billion-dollar hedge funds. And one man stands above the rest, as the best investor of all-time.
I’m sure most would consider Warren Buffett to be the best investor ever. But the numbers tell a different story. In fact, the greatest investor of all-time is billionaire activist investor Carl Icahn.
Incredibly, both Icahn and Buffett have been building their respective investment empires for close to five decades. And more incredibly, they remain at the top of their profession.
Icahn has, unequivocally, shown superior skill as an investor.
Consider this: Icahn has returned 31% annualized since 1968. That would turn every $1,000 invested with Icahn into $325 million today – an incredible number. Buffett, on the other hand, returned 19.5% annualized during virtually the same time period. Buffett’s growth rate over that length of time is indeed amazing too. But due to the power of compounding, the wealth creation of Buffett, from pure investment returns, pales in comparison to that of Icahn. Icahn’s investment skill has created $65 to every $1 created by Buffett.
So how has Icahn been able to outperform Warren Buffett (and the broad stock market) by so much and for so long?
Of course, Icahn is a dogged shareholder activist and often an agitator of corporate management. Key to his playbook is using power and influence to control his own destiny on stocks he invests in.
When we look strictly across the stocks in his portfolio, without necessarily the story-lines, we can see some portfolio traits that have made Carl Icahn the world’s greatest investor.
Trait #1: The media, mutual funds, CNBC, finance books — they all say having a high win rate is paramount to good investing. They tell you that the most important thing is being right. Like many widely accepted adages, it happens to be dead wrong. Billionaire iconic hedge fund investor, George Soros, says “it’s not whether you’re right or wrong, but how much money you make when you’re right and how much money you lose when you’re wrong.”
Over the past 20 years, the stocks in Icahn’s portfolio have a win rate only a tad bit better than a coin toss. But he puts himself in position, so that when he wins, he has the chance to win big! This is the concept of asymmetrical risk to return, a concept often found in the wealth creation of billionaires. They like to invest in opportunities with limited risk and huge potential return.
Among Icahn’s stocks, his winners were almost twice that of his losers.
Trait #2: Icahn became rich by taking concentrated bets throughout his career. As Buffett has famously said, “you only need one or two great ideas a year to get rich.” This is exemplified in Icahn’s portfolio. His big win on Netflix garnered a 463% return in just 12 months, between 2012 and 2013.
Trait #3: Patience is king. You don’t have to go to Harvard or have a Goldman Sachs investing pedigree to have patience. And many times, that can be the difference between making money and losing money in investing. Icahn has an average holding period of over two years.
Trait #4: Risk! When you hunt for big returns, you must be willing to accept drawdowns and losers. Icahn has multiple stocks over the past 20 years that have been full losers (i.e. they went to zero). But when you have a portfolio full of stocks with big potential, in the end the big winners can more than pay for the losers.
With these key themes in his portfolio, Icahn has achieved the greatest track record of any investor alive, and a net worth in excess of $25 billion along the way. And he has done it with a portfolio of stocks that most investors would likely run away from.
Want to invest like the greatest investor of all-time? According to his most recent 13F filings, Icahn’s five biggest stock positions (aside from his holding company) are Apple (AAPL), CVR Energy (CVI), eBAY (EBAY), Federal Modul Holdings (FDML) and Hologic (HOLX).
Billionairesportfolio.com, run by two veterans of the hedge fund industry, helps self-directed investors invest alongside the world’s best billionaire investors. By selecting the best ideas from the best billionaire investors and hedge funds, our exited stock investment recommendations have averaged a 31% gain since 2012.
Billionaire investor Carl Icahn made news again this week, with an open letter to Apple’s CEO, Tim Cook. As most know, the “Icahn Effect” has been a powerful one for Apple shareholders. Since he first announced a stake in Apple in August of 2013, the stock has more than doubled. In fact, each time Icahn publicly talks about Apple, the stock tends to go up.
But this time, instead of following Icahn into Apple, there is a another Icahn-owned stock that offers more upside. Plus, it comes with an added bonus: You can buy it at a cheaper price than what Icahn paid for his shares.
Icahn initiated a position in Manitowoc (symbol MTW) in late 2014 at $20.03 a share. He then added to his position in early 2015 at $20.69 a share. The stock now sells for $19.75. So the world’s best investor just did all the work for you. By his actions, he’s telling us that he thinks Manitowoc is cheap at $20.40. And that’s almost a $1 more than where the stock trades today.
Icahn owns almost 8% of Manitowoc now. And in February the company agreed to Icahn’s demand to separate its two businesses into two different companies, one for its crane business and the other for its food service business. According to analysts, this separation will create value for shareholders and could reprice the stock to $30 a share — or 50% return from its share price today. In addition to the potential revaluation of MTW shares from the split of its business lines, MTW is cheap on its current valuation. The stock trades at just 14 times forward earnings.
So today, you can get an edge on the world’s best investor by buying Manitowoc at a cheaper price than he did. And he is working for you, as a vocal shareholder, to unlock potentially 50% more value in the stock. Not a bad deal.
BillionairesPortfolio.com helps average investors invest alongside Wall Street billionaires. By selecting the best ideas from the best billionaire investors and hedge funds, our exited stock investment recommendations have averaged a 31% gain since 2012, beating even Carl Icahn’s record for the same period.
Stocks have been on a great run and with the European Central Bank and Bank of Japan pumping money into the global economy–picking up where the Fed left off–expect it to continue.
Given the low global inflationary environment and the ultra-easy global central bank activity, bond yields in the U.S. have remained subdued, despite the expectation that the Fed will be raising rates for the first time in nine years later this year. The 10-year note is yielding less than 1.9% this morning.
Meanwhile, we’re seeing a rare occurrence in stocks, and an extremely bullish one. For one of the few times in history, stock dividends are paying a yield greater than U.S. Treasurys. The yield on Dow stocks is 2.25% and the yield on S&P 500 stocks is 1.99%.
This positive yield differential for stocks has only happened five other times in history; each time stocks went up big one-month and three-months later.
If that’s not enough, April happens to be the single best month for Dow stocks over the past 50-years.
With this all in mind, here are a few ways to play it:
You could buy the Dow Jones Industrials Average ETF (DIA) or the three times leveraged Dow ETF (UDOW). Or, our favored way at BillionairesPortfolio.com is to invest alongside an influential investor that has huge skin in the game. This gives you an extra layer of protection, a fellow shareholder that has the power and influence to control his own destiny. With that, you could buy these four Dow component stocks, each controlled by one of the top billionaire investors in the world:
1) Apple: Billionaire activist legend Carl Icahnowns Apple. He says it’s worth $200, and he’s recently been adding to his position. Apple has multiple catalysts in April. The company is launching its watch. Apple reports earnings this month, where we could potentially see another stock buyback announcement and/or an increase its dividend.
2) Dupont: Billionaire activist investor Nelson Peltz has nearly 20% of his hedge fund’s assets in Dupont. He owns nearly 1.8% of the company and has asked Dupont to grant him and his team Board seats, as he wants DuPont broken up to unlock value.
3) Dow Chemical: Billionaire activist hedge fund manager Dan Loeb is also agitating for change at Dow. Loeb owns more than $1 billion of Dow shares and the company has just agreed to split off its chlorine business, a byproduct of Dan Loeb’s activist efforts.
4) Coke: Everyone knows Warren Buffett owns Coke. The interesting part is that Buffett has recently orchestrated a huge merger between two of the largest big-brand food companies, Heinz and Kraft. Kraft shareholders made a 35% premium on their shares overnight. Applying the same takeover multiple to Coke, Coke could be worth as much 40% on a private equity buyout.
BillionairesPortfolio.com helps average investors invest alongside Wall Street billionaires. By selecting the best ideas from the best billionaire investors and hedge funds, our exited stock investment recommendations have averaged a 31% gain since 2012, beating even the great Carl Icahn’s record for the same period.
The magic formula for investing is “risking a little, to make a lot.” When you do this, and spread your risk, you only have to be right a handful of times to make outsized returns.
With this in mind, let’s take a look at two stocks that are among the most widely traded in the world, Facebook and Apple.
The average consensus analyst target price target on Facebook is $90. That’s only 12% higher than current levels. By purchasing Facebook today you are risking a lot to make a 12% potential return. Facebook is trading at 75 times trailing earnings and 37 times forward earnings. High P/E stocks tend to underperform in rising interest rate environments. And that’s precisely where we are headed in the coming months.
What about Apple?
The average consensus analyst price target on Apple is $140, just 10% higher than Apple’s current share price. At best, buying Apple today you will get a potential 10% return. Apple trades at 18 times trailing earnings, and 15 times next year’s earnings estimate. While it’s a stock that is far more fairly valued than Facebook, a 10% upside doesn’t compensate for the downside risk.
So, while Apple and Facebook are the darlings of the stock market, neither offer a potential reward great enough to compensate for the risk to your capital.
On the other hand, here is an example of a stock that does: Chicago Bridge & Iron, symbol CBI.
Chicago Bridge & Iron Company is a Warren Buffett-owned stock. It has an average consensus analyst target price of $72. That’s more than 52% higher than its current share price. The stock trades for just 9 times trailing earnings, and 7 times forward earnings. A low P/E ratio is what Buffett calls a “margin of safety” — it gives him limited downside with potential for big upside. Buffett owns more than 8% of Chicago Bridge and Iron.
Billionairesportfolio.com gives self-directed investors the opportunity to piggy-back an actively managed portfolio of low risk-high reward stocks — all owned by the world’s best billionaire investors.
Yesterday, billionaire hedge fund manager Barry Rosenstein, of the activist hedge fund Jana Partners, said that Hertz ($HTZ), the largest rental car company in the U.S. should triple in price. Rosenstein is taking a page from Icahn on two fronts: 1) Using the media to promote his message, and 2) calling for a stock buyback.
Rosenstein’s fund owns more than 8% of Hertz. And Carl Icahn owns 10% as well. Altogether, hedge funds own more than 50% of the Hertz, even as the stock has dropped nearly 25% over the past six months. Rosenstein said Hertz will be able to buy back as much as 25% of their stock, which should juice earnings and cause the stock to triple in price over the next year.
With two of the best billionaire activists in the world controlling almost 20% of Hertz, this stock is a must own stock for investors in 2015. You can see in the chart below, the stock has based just above $20. Icahn owns most of his stake above $28.
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