Invest with Carl Icahn, But Don’t Mimic Him

Source: Insider Monkey

Legendary value investor Carl Icahn is one of my favorite investors. And when he invests, I pay attention.
Although I invest with Carl Icahn, I don’t mimic him.
In August, Icahn announced he had an established “a large position” in Apple Inc. (NASDAQ: AAPL). He subsequently added to his position last week after Apple shares sold off on mixed reviews of its iPhone 5S and technicolor iPhone 5C.
Today, Icahn sees an opportunity and calls Apple a “no-brainer.” He believes any issues are simply exaggerated. In a CNBC interview, Icahn declared, “I really think Apple is one of my best [investments] right now.”
Icahn could be right. Apple might be one of his best investments. But this doesn’t mean I’m buying the stock…
After all, I said I “pay attention” to Icahn. But I didn’t say I mimic him. I’m not following him into Apple because I’ve not yet to analyze Apple. I’m also not privy to Icahn’s analysis; nor am I privy to any of his value targets that would trigger a sale.
Many investors like to follow well-known investors like Icahn. After Icahn announced his Apple position, the share price shot up 8%. These shares weren’t bought on thoughtful analysis. Rather, they were bought in the wake of one prominent investor buying the stock.
Mimicking is risky behavior, even if one mimics an investor of Icahn’s caliber.
To be sure, Icahn has been right more than he has been wrong. You don’t amass a $20-billion fortune by making frequent mistakes.  But every legendary investor – including Warren Buffett, Peter Lynch, and even Carl Icahn – has been wrong.
Icahn was recently proven wrong on Dell Inc. (NASDAQ: DELL). The company was valued far lower in a recent management-led buyout than Icahn had anticipated. There are of course many other examples as well.
I pay attention to Icahn because I am interested in learning where he perceives value. My intention is not to follow lock step.  If you’re unwilling to undertake your own analysis and you appreciate Icahn’s skills, the better and safer strategy is to invest with him in all his investments.
Lost in the chatter on Icahn’s Apple purchase, is just how he actually bought the shares. It turns out Icahn bought Apple through his publicly traded investment fund Icahn Enterprise LP (NYSE: IEP).
By investing with Icahn through Icahn Enterprises, investors not only gain exposure to Apple’s potential, they gain exposure to a diversified portfolio of other profitable value investments. The portfolio includes Netflix (NASDAQ: NFLX), CVR Energy (NYSE: CVI), Forest Labs (NYSE: FRX), Nuance Communications (NASDAQ: NUAN), and other notable value plays.
Icahn has proven he can produce wealth for investors in a portfolio setting. Since 2000, Icahn Enterprises has generated a 1,085% total return, far outpacing Berkshire Hathaway’s (NYSE: BRK.B) gain of 208%.
A portion of Icahn Enterprises’ exceptional return is attributed to a lush distribution. The company currently pays a $5.00 annual dividend that produces a 6.3% yield on the current unit price. This is more than double Apple’s 2.6% yield.
Superior long-term performance and a high yield make Icahn Enterprises a perfect holding in the High Yield Wealth portfolio. Icahn Enterprises was recommended to High Yield Wealth subscribers this past July. Since then, it has generated a 12% return and a $1.25 quarterly distribution.
Though I haven’t invested directly to Apple, I have exposure to Apple and Icahn’s investment thesis through my shares of Icahn Enterprises. More important, I have exposure to a portfolio of investments (which offsets Apple’s risk) complied by a value investor with a long record of generating superior investment returns.

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