132: Icahn Enterprises: Profile of Carl Icahn, Billionaire Investor

Learn about billionaire Carl Icahn, how he made his money, what stocks he owns and his outlook on the stock and bond market.

Carl Icahn is an 80 year old investor worth $20 billion and one of the 50 wealthiest people in the world. He owns 90% of Icahn Enterprises, an investment fund, the symbol is IEP.

He's a shareholder activist, one of the original corporate raiders and greenmailers.

That means he buys stock in companies and causes contention with management about why their stock is undervalued, to the point that they pay him to get rid of him.

He's famous for trying to takeover companies and they either succumb to his management suggestions or pay him to go away. Attempted to takeover Nabisco and was paid $600 million by Philip Morris to go away.

Carl Icahn gained fame in the 1980's by taking over and attempting to take over some large companies like Texaco, TWA and American Airlines. He was successful taking over TWA. It went bankrupt and eventually re-emerged.

More recently he's been contentious with managements of Netflix, Dell, Family Dollar, Ebay and Apple. With Apple, he wanted them to pay out retained earnings in the form of a dividend and to buy back stock. He has since divested himself of all his Apple stock in the 4th quarter of 2015, which used to be his largest holding. He says it was due to being worried about Apple and things going on in China.

I was at the airport last fall and in the CNBC store waiting for my flight. On the TV was Carl Icahn talking about why he expected a big decline in junk bonds and the stock market. He's been very vocal to caution investors, particularly bond investors, because he believes there's trouble ahead. Judging by how he's invested, I'd say he thinks it's soon.

His company is short credit default swaps and broad market index swap derivatives, which means he is betting that junk bonds (low rated corporate bonds) and stock market indexes will go down. He says he's more confident about markets dropping 20% than increasing by 20%.

His company is 149% net short (due to leverage).

Icahn Enterprises has a phenomenal long-term track record, but the last 2 years have been poor. Last year they were down 18% and they are down 12.8% in the 1st quarter of this year.

Some of the companies he currently owns includes: Paypal, AIG, Herbalife, and Freeport-McMoran.

He is one of the all-time greatest investors - don't rule him out. I always pay attention to what the billionaires are doing because they typically follow cycles, which I do too. It gives you some ability to see what's coming, because cycles repeat at regular intervals. This is something billionaires know, but most investors don't. It's changed my investing perspective in the past few years and something that has allowed our VIP Experience to be up 25% YTD when the S & P is only up 1%.

Like Mr. Icahn, I also am expecting some declines in the stock market and have positioned my clients in assets other than stocks.