Former foes Carl Icahn and Bill Ackman embrace at Delivering Alpha. (Photo Credit: Heidi Gutman/CNBC) |
The annual Delivering Alpha conference is supposed to be about big ideas. Managers of some of the largest hedge fund firms in the world present their current best investment ideas, while other hedge fund managers and investment world heavy-hitters sound off on what’s wrong with the world — which in these circles often translates to how to make money off of the shortcomings of policy makers and corporate chieftains.
Or, as activist investor Carl Icahn put it at the Institutional Investor and CNBC-hosted day-long forum yesterday, “in a lot of companies, the CEO is out playing golf, and the only way to get him off the golf course is to let him know you’re filing a 13D.”
Icahn, never one to shrink away from speaking his mind, didn’t want to talk about the current federal investigation into whether golf pro Phil Mickelson traded on insider tips that came from Icahn, except to say that he’s never met Mickelson. But when he spoke late in the day at Delivering Alpha, he presented an entertaining recap of a couple of the big themes that came up in other panels: the activist investor as hero and U.S. Federal Reserve Chairman Janet Yellen as market foe.
A good way to get Icahn started is to question the motives of an activist. Scott Wapner of CNBC, who interviewed Icahn on the stage, noted that Martin Lipton, a lawyer who represents the corporations that activists target, and Larry Fink, CEO of BlackRock, “say you guys are in this for the short term.”
“That’s complete nonsense,” said Icahn. “We’ve made billions of dollars for shareholders over the last 20 years.” He also pointed out that he has stocks in his portfolio that he’s held for as long as 15 years.
And then it started to get personal. Nelson Peltz, a founding partner of Trian Partners in New York, had spoken earlier in the day, also defending activism. But Peltz had said that while he and Icahn are good friends, their styles are different; Trian was not trying to make a quick hit over the weekend.
“I hope he didn’t mean we want to make quick hits over the weekend,” said Icahn. Both Icahn and Peltz’s Trian Partners have activist positions in the discount retail chain Family Dollar, but as an indication of style, Peltz simply said, “we are not satisfied,” whereas Icahn said, “I’d throw the whole board out.”
Icahn often tweets about his positions and his dinners with the likes of Apple CEO Tim Cook — and he’s had dinner with most of the other CEO’s of companies he’s targeted, including Howard Levine of Family Dollar, a chief executive he’d like to replace. Peltz, on the other hand, keeps his conversations with the senior managers of activist targets fairly private. Of his newly disclosed position in Bank of New York Mellon, Peltz said, “You haven’t heard from me about that because we like to meet with the board and present our white paper before we announce it publicly.... We’re having what I hope will be constructive conversations.”
Then there was the other matter of how much longer the Fed should continue the quantitative easing program, with all of its accompanying low interest rates and the side effect of a soaring stock market. If the Fed were a publicly traded company and Icahn decided to invest, he would presumably demand a complete change in strategy. “When Janet Yellen says financial weapons of mass destruction are not well understood, you have to worry about the excessive printing of money because you don’t know how it’s going to work,” said Icahn. He compared the Fed’s stimulus policy to continuing to give a patient medicine even after the patient has shown signs of recovery.
The Fed’s role in a recovering economy was an issue that had come up often during the day. Stanley Druckenmiller, founder of Duquesne Capital Management, was adamant that it’s time to end quantitative easing. “I’m fearful today that our obsession with what happens to markets in the near term will cause much greater risk to our economy in the long term,” said Druckenmiller. He presented statistics that indicated a strong recovery: average net worth per household and industrial production at new highs, employment and retail sales rising.
The degree of recovery is, of course, subject to debate because the rosy average numbers don’t apply to all sectors. Leon Cooperman, CEO of Omega Advisors in New York, said he thinks income disparity will be an important topic of discussion in the coming years. “My preference is to solve it by teaching people how to fish. Some say you should give people fish,” he said. Earlier in the day U.S. Treasury Secretary Jacob Lew said the government was going to have to do more to get the economy off the ground, such as finance infrastructure projects, and use taxes to pay for some of the recovery measures.
For his part, Icahn said that federal stimulus isn’t the best way to boost the economy. “We should be worrying about our productivity and who runs these great industries we have,” he said.
There was a time when the political polarization over taxes and spending paled beside a certain decade-long feud in the hedge fund world — the one between Icahn and William Ackman, CEO of Pershing Square Capital Management in New York. But that was so 2013. Those who attended Delivering Alpha last year might recall how Icahn spoke at length about his nemesis and, among other issues, their war over Herbalife, which Ackman has shorted and claims is running a pyramid scheme while Icahn has placed long bets. “Herbalife stock goes up every time Bill Ackman talks about shorting the shares,” Icahn said then. “I like Ackman. Anybody that makes me a quarter of a billion I like.”
This year, however, Icahn has been a supporter of Ackman’s efforts to take over Allergan in a partnership with Valeant, and the two high-profile activists have made up. Now there is a photo from Delivering Alpha 2014 that has gone viral, of their “bro hug” on the stage. It happened when Wapner asked Icahn about Herbalife, then said, “Why don’t we ask Bill Ackman?” That was the cue for Ackman to stride onto the stage; the scheduled final act was the appearance of a mystery guest, and he was that guest.
“What we share is a concern that shareholders have a voice,” said Ackman. Further praising Icahn, he said that Martin Lipton, with his franchise in the legal defense of target companies, “should be sending royalty checks to Carl. Maybe I deserve some too.”
The two activists have not, however, found any common ground on Herbalife. Icahn isn’t talking about the stock right now. “We’re in a quiet period, but I will say one thing... we haven’t sold one share,” said Icahn. Ackman said he’d love to find a way for Icahn to get out of the stock—and he could walk away now with a nice profit.
“I just want him to sell it,” he said after the conference.
