The mark of a truly great investor

How good is Carl Icahn? Aside from the fact that he is now the wealthiest investor in the world, having surpassed George Soros this year with $8 billion in gains for calendar 2013 (according to Bloomberg), just look at how he plays his cards at the table.

The mark of a truly great investor is someone who can set themselves up to win even if they lose. Some call that “optionality” or a “margin of safety.” I call it genius, especially when the stakes and dollar amounts and visibility are this high.

That’s exactly what’s going on with Carl Icahn’s position in Apple. The stock’s been shooting straight up since his arrival and its trajectory has almost nothing to do with any of his proposals. The company has independently embarked on the largest share repurchase plan in history but Carl wants them to do more. And they may – or they may not. It doesn’t matter. He can make money regardless thanks to the iPhone 5S, the new iPad products and whatever else they roll out in the future (TV, networked home, Internet of Things, iTunes payment processing etc).

Icahn has announced a softening in his stance re: how big the buyback he’s seeking needs to be. He’s filed a proxy motion for a precatory vote of shareholders on his proposals – precatory meaning non-binding on the company, just a suggestion. Will he win? Who knows. Adam Lashinsky at Fortune is characterizing this move as the investor having “blinked” in his game of chicken.

No, Adam. I don’t think so.

Why would he blink when he’s not in any danger at all. Isn’t that how a game of chicken works – both parties have equal amounts of risk should they continue? What is Carl’s risk? Reputation? Please. He’s just allowing the investment to play out.

It is entirely conceivable that shareholders do not vote his way but that he wins anyway in the only way that truly matters – making money. He lost his proxy fight with LionsGate but he still made money in the stock. With Netflix, he barely had to clear his throat. What’s the difference?

Carl is the king.


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