Warren E.  Buffett and Carl C. Icahn are inverse investors who correlate in more ways than one. In recently released letters to shareholders, the two billionaires talk up their returns and approaches to deploying capital. Their styles couldn’t be more different, but both beat the market by betting on America, playing hardball and trading on personal brands. Yet their greatest common bond is that neither can be easily replicated.
Though the folksy Omaha native could never be confused with the combative Brooklynite, they have both proved more than capable of making money from the American stock market. Mr. Buffett missive on Saturday flaunts Berkshire Hathaway’s compounded annual return of 20 percent on its per-share book value over nearly a half-century, doubling the performance of the Standard & Poor’s 500-stock index, including dividends. Mr. Icahn, meanwhile, showcases his 1,662 percent return since 2000, an eightfold improvement on Berkshire’s stock over the same span, Mr. Icahn giddily notes, and 25 times the broader index.
Owning businesses like MidAmerican Energy is Mr. Buffett’s forte, but he also buys minority stakes in big companies like IBM. Mr. Icahn, on the other hand, specializes in acquiring slugs of stock in the likes of Apple, though his biggest returns are often generated on the rare occasions he takes control. For example, he has made some $1.7 billion from oil refiner CVR in less than two years.
both men, with a combined 161 years of existence between them, know how to get a laugh, but they also take their negotiations seriously. As his latest campaign against eBay demonstrates, Mr. Icahn doesn’t back down from a fight. Mr. Buffett’s entreaties are quieter but no less ruthless. His investment in Heinz, for one, includes a 9 percent coupon on $8 billion in preferred stock, whose other features, Mr. Buffett says, should increase the return to 12 percent. That’s $1 billion a year.
The Buffett brand enables that sort of deal, which probably wouldn’t be available to even the most ardent value investor. Similarly, an Icahn tweet alone these days can be worth billions to a company’s market value. Few if any activists wield that sort of clout.
Each investor also has enlisted reinforcements to his cause. The Sage of Omaha’s two handpicked portfolio managers outperformed him. One of Mr. Icahn’s most profitable trades, Netflix, originated from his son and his son’s investment partner. Those contributions may add to the abundant optimism in future returns expressed by the two investors, but the individualistic influence of Mr. Buffett and Mr. Icahn also means their enterprises share one big, and notable, vulnerability.
Jeffrey Goldfarb is an assistant editor at Reuters Breakingviews. For more independent commentary and analysis, visit breakingviews.com.
