Bottom Fishing Carl Icahn

During his recent interview with Tobias, Chris Mittleman, Founder of Mittleman Brothers discussed Bottom Fishing Carl Icahn. Here’s an excerpt from the interview:

Chris: I remember when I first bought into American Real Estate Partners, which is now known as Icahn Enterprises, IEP. It was called American Real Estate Partners, the symbol was ACP, but it’s the exact same corporate entity. I bought it in 1996 thinking that I was bottom fishing Carl Icahn because Carl Icahn had gone through a number of years of being just very beat up. He lost all of his money in TWA twice, two consecutive bankruptcies. He lost all this money in Marvel Entertainment, which is before they became successful with all these movies. He saw the potential and lost it all. When I bought into that in 1996, I paid $9 a share when it was $13 of net cash, and another $10 of income-producing real estate. And I thought there’s no way I’m not going to make money with this guy at some point. I mean he’s not lost his mind.

Six years go by and the stock hasn’t gone anywhere. It’s gone up and down. Six years have gone by. I had watched the stock for six years before buying thinking that I was really being patient and smart. Another six years go by and I made no money. And the value guys that were in the stock before me, who led me to it, had left. Tweedy, Browne was the big value– [crosstalk] They sold in despair, like eight or nine, but then from 2000, six years after the initial buy to 2007, it went from 9 to 140. And we sold, unfortunately, no higher than 88. I think we had like a 54, 56 average exit.

Essentially, what happened was that six years of pain and misery turned into 10 years of about a 20% CAGR on that investment. Sometimes, it can take a long time, but how do you know whether you’re being just stubborn– you have to question yourself all the time, and I don’t know 100% for sure that I’m going to be riding all these names. I’m sure that I won’t be. I’m sure that some will be– I think we looked at– Evan in our office, our business development marketing guy, he did a spreadsheet year or two ago, and it turned out that we had like 100 names in total that we’ve ever invested in during the 17 years of the composite.

Of those 100 names, we booked profits on nearly two-thirds of them. So, that’s not a bad hit ratio, it’s probably pretty good. I haven’t seen anyone else do that exercise or published something like that, but I would assume that it’s pretty good. So, if we’re right two-thirds of the time over an extended period of time, then that should be good enough to make an above-average return because obviously, we’re buying things that are cheaper than the market average.

I do think it comes back is what I’m saying. I don’t think I’m being pollyannaish in thinking that things will ultimately get better because so much money is piled into these passive strategies. It’s very reminiscent. You look much younger than me, so I don’t know if you would remember this, but in 1999 and 2000, it was a very similar mentality in the indices and in QQQs.

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