scorecardresearch5 vital investing philosophies of famous US investor Carl Icahn

5 vital investing philosophies of famous US investor Carl Icahn

Updated: 08 Aug 2022, 07:52 AM IST

There is a reason why some veteran investors are more successful than others. Investing is a science that can be crafted and polished into art that only a few can master. Carl Icahn is one of the lesser-known investors who made billions in the market by remaining steadfast to strategies that most others ignore. 

Buying stocks means investing in the business, so you must park your funds accordingly.

Buying stocks means investing in the business, so you must park your funds accordingly.

Carl Icahn is a self-made billionaire who earned most of his earnings from the market. This may be surprising considering how many people complain of having lost their capital on investing in the market. The market belongs to none, though it certainly rewards and compensates well to those who show patience and grit with their investments. This billionaire owner of Icahn Capital Management had started investing while pursuing his college degree and continued to compound his investment with time on his side.

This hedge fund manager mastered the art of arbitrage trading first and earned profits by exploiting the price differences of stocks across markets. This veteran investor whose investment style is now a case study among many new investors and traders in the market shared valuable lessons on his wealth and investments.

Do not speculate; focus on value

When you are buying shares, you are actually investing in a business. Treat your stock as more than just a piece of document. When you invest in a stock, you are actually participating in a business. That is why you must understand the businesses whose stocks you want to buy. However, this necessitates considerable research about the companies, their business strategies, earnings potential, and so on. It is worth it as it lends you a high conviction regarding the stocks that you buy and hold to sell later. 

Actively participate in the companies that you invest in

You must not be a mere witness to the investments that you make. Carl focuses on participating to augment the companies’ growth, thereby, creating more scope for profits. For example, in many of the companies that Carl had invested in, he made a strong case for transformation and ensure changes in the leadership of the companies to ensure their growth. After adding a strategic value to the companies, he invested in, Carl cashed out with huge profits worth billions of dollars.

Invest in companies that are productive 

You must look at the pricing power of companies to gauge their productivity. Carl insists that you must understand how this power works. Study how the company benefits from its wholesale transfers and unbreakable moat and is able to resist all efforts to capture the market. Every company’s pricing power changes with time, thus, affecting its productivity. Companies making the most of their pricing power will be able to use it to their benefit, thus, earning you returns over the period. 

It is equally sinful to not act at all or act impulsively

Time is the biggest factor compounding all our investments. This explains why you must wait for at least five years to enjoy enviable returns on your investments. While patience is the key, you cannot afford to be a mute witness to sudden changes in the stocks or funds that you had invested in. Aggressive intervention would help to make the best of the opportunities. A balanced approach based on the know-how of when to act and when to sit tight will help you gain a lot in the world of investments. 

Being popular need not be right

Some stocks may be popular for myriad reasons, but it must not prompt you to invest your money in them. In the world of investing, popular stocks in most cases end up being duds and an unwanted burden in your portfolio. While collective opinion may eulogize a stock for many reasons, the ground reality may be starkly different. Carl warns against the herd mentality and tells investors to research themselves before diving into any stock and buying it. 

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First Published: 08 Aug 2022, 07:52 AM IST