Carl Icahn’s 3 Biggest Investments of All Time

Some billionaires like Warren Buffett are loved for their investments. Tens of thousands of people come to Omaha each year to attend the annual event Berkshire Hathaway (NYSE:BRK-A)(NYSE:BRK-B) to listen to the investment wisdom of Buffett and his late partner Charlie Munger. Other billionaires, not so much.

Where companies celebrate a Buffett investment, they shudder when investors like Carl Icahn acquire a stake. Despite his market success, Icahn has a reputation as a corporate raider who tears companies apart and leaves their bones bleached in the sun. Even if they subscribe to a value investing philosophy like Buffett’s, they approach it in very different ways.

The Oracle of Omaha looks for great companies that are trading at good prices before buying and holding for the long term. Icahn is looking for stocks that trade at significant discounts, but is willing to blow up the business by loading it with debt, selling its best assets and then leaving with a significant profit. It is said about the character Gordon Gekko in the film Wall Street is inspired by Icahn.

While Icahn doesn’t always invest this way today, let’s take a look at three of the billionaire’s biggest investments of all time.

Key points about this article:

• Billionaire investor Carl Icahn is the leading corporate raider known for his hostile takeovers and leveraged buyouts.
• Icahn’s appeal today is that of a more benevolent corporate activist, and the three deals below are among his most famous ones that helped erase his reputation.
• If you are looking for action with huge potential, be sure to grab a free copy of ours brand new “Next NVIDIA” report.. It has a software stock where we are sure it has 10x potential.

Tappan

Row of washing machines

Carl Icahn’s 1978 investment in the appliance maker Tappan it wasn’t particularly big and his profit was relatively small, but it was his first major investment that raised eyebrows and came to define some of his biggest investments later.

Founded in the 1800s, Tappan was a well-known appliance company that had fallen on hard times. With his shares at a low value, Icahn began buying stocks by combining his own money with borrowed money to finance the purchase. After acquiring a 5% stake in the business, he asked for and received a seat on Tappan’s board of directors, and then sought to liquidate the company. Instead of disappearing, the appliance maker sold itself Electrolux (OTC:ELUXY) for $2.8 million.

The sale doubled Icahn’s initial investment of $1.4 million. The financier’s maneuvers so impressed Tappan’s chairman of the board that he later became a regular investor alongside Icahn.

The billionaire’s foothold in the market eventually became so great that when Icahn established a stake in a business, management often paid him higher sums to leave. In this way, the term “greenmail” became associated with Icahn.

Trans World Airlines

The plane flies above the clouds at sunset

It was his unsettling hostile takeover Trans World Airlines which defined Icahn’s reputation and highlighted his use of the leveraged buyout strategy.

In 1985, Icahn acquired a more than 20 percent stake in the airline that was struggling with deregulation. Using about $470 million of his own money, he used the company’s assets to secure loans that allowed him to buy the airline and take it private. In the end, TWA was saddled with $540 million in debt.

Once he took control, he began cutting costs while working to improve operational efficiency, including selling non-performing assets and restructuring the company to focus on profitability. Among those assets sold are airport terminals and other real estate owned by TWA, the number of aircraft in the airline’s fleet has been reduced, and it has sold some of its most valuable routes to European destinations.

While all of this raised cash and eliminated some of TWA’s debt, the long-term implications were that the airline could no longer compete effectively. TWA eventually filed for bankruptcy in 1992. Although it continued to operate for another decade, it filed for its third and final bankruptcy in 2001 and was acquired by American Airlines (NASDAQ:AAL). Icahn, however, walked away from the investment with a profit of $1 billion.

Herbalife (HLF)

Jars with nutritional supplements

One of Icahn’s most important investments, which did not involve tearing down a company but actually supporting it, was the supplement seller. Herbalife (NYSE:HLF).

Fellow billionaire investor Bill Ackman opened a large $1 billion short position against Herbalife in 2012, calling the company a pyramid scheme. However, this sparked a hedge fund war that saw other notable investors including Robert Chapman Chapman Capital Partners; Daniel Loeb, from The capital of the third point; and John Hempton, of Bronte capital all criticize Ackman as wrong.

Icahn, who had been feuding with Ackman for years over a failed real estate deal that ended up in court, eventually became Herbalife’s largest shareholder in an effort to defeat his nemesis. He owned 13% of the company and increased his stake to 21% at its peak. It also received five seats on the board of directors.

After five years of fighting, Ackman finally accepted his Pershing Square Capital Management the fund quietly sold its short position at a loss of $1 billion. Icahn, on the other hand, ended up walking away with a profit of $1.3 billion.

Saying he believed in the company, its products and its strategy, Icahn said at Barron’s“The time for activism has passed as the company has grown, and I typically don’t invest billions of dollars in companies where our activist role isn’t necessary.”

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