• Icahn has a reputation as an activist investor – Buffett is known for his value strategy
• Both star investors are looking for undervalued stocks
• Buffett prefers long holding periods – Icahn puts less emphasis on this
Carl Icahn is the founder and chairman of holding company Icahn Enterprise, which is also the largest holding in his portfolio, and has built a reputation as an activist investor over the past several years. By investing in a company, he tries to influence management and corporate strategy. For example, he took on the fast food chain McDonald’s and insisted on more animal welfare in McDonald’s supply chains.
Meanwhile, Warren Buffett, one of the most successful investors of all time and CEO of investment holding company Berkshire Hathaway, is known for his value investing strategy. With his investment vehicle, he relies on companies that are in good economic shape, have a strong competitive position, a good management team and whose shares are undervalued. His knack for stock trading earned him the nickname “Oracle of Omaha.”
Despite some similarities between the two star investors, there are also some points in which the investment strategies of the two differ. In an interview with CNBC’s “Closing Bell: Overtime,” Carl Icahn explained his own and Warren Buffett’s philosophy.
Icahn: “I don’t know if we totally disagree.”
“He’s a tough guy to disagree with. I mean, look at his record,” Icahn said in an interview, alluding to the fact that Buffett is often called the greatest long-term investor of all time, according to CNBC.
“I don’t know if we totally disagree. I think we sort of have a different deal with Warren. I’m an activist,” Icahn said. “I’m looking for a company that I think is very undervalued, like [Southwest Gas], and I can do something about it. I do it with pleasure. That’s why I come to work every day,” CNBC quoted Icahn as saying.
Search for undervalued stocks – difference in holding periods
So both Buffett and Icahn are looking for undervalued stocks. But while Buffett is known for his patience and long holding periods of his investments, once writing in a letter to shareholders that when his investment vehicle has “parts of outstanding companies with outstanding management, the preferred holding period is actually forever,” Icahn explained that it the positions he builds are less about building a portfolio to be held over the long term.
“We’re looking for the moment to strike and obviously I would have made a lot more money if I had kept the Apples and Netflix’s we bought, but we bought them and made a big profit,” Icahn told CNBC .
In 2016, Icahn announced that he had sold all of his Apple shares — the same year Buffett began buying Apple stock with his holding company, Berkshire Hathaway. Since then, the Apple stake has become one of Buffett’s most successful investments.
Icahn sells Occidental stake – Buffett buys
The star investors have also followed different approaches with the shares of the US oil producer Occidental Petroleum, based in Houston, Texas. For example, Icahn sold its remaining Occidental Petroleum stock in March 2022, while Warren Buffett’s Berkshire Hathaway further increased its already sizeable Occidental holding in a matter of days. Icahn’s decision to divest his Occidental holding as oil prices soared to multi-year highs underscores the contrasting philosophies he and Buffett have, the US billionaire told CNBC.
Icahn began buying Occidental stock in 2019. In the interview, he explained, “We actually made almost $2 billion from the stock. And I think we’ve done something very good as activists,” adding that he still has a “complicated hedge” against Occidental.
“I own the warrants and short some stocks against them and buy short calls against them,” reports CNBC Icahn. “It’s my old days. I was an arbitrageur for a while and I love playing these derivatives, so that’s one of the games I play in,” says Icahn.
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