Carl Icahn 'More and More Concerned' With Stock Market

- By James Li

On Monday, activist investor Carl Icahn (Trades, Portfolio) discussed his increasing concerns with the U.S. stock market in a CNBC interview with Scott Wapner on "Fast Money Halftime Report."

Icahn suggested that by keeping interest rates flat, the Federal Reserve has created a "false market": in an economy that has an inflation rate of at least 1%, the Fed likely has to increase interest rates even though it may lead to adverse changes to the dollar. The billionaire investor also suggested that several companies trading on the Standard & Poor's 500 index are "way overvalued," considering the risk premium for emerging markets. The U.S. stock market is significantly overvalued based on Warren Buffett (Trades, Portfolio)'s indicator of total market valuation as of Oct. 17.

While Buffett suggests investing in predictable companies meeting his four-criterion investing approach, Icahn stressed the importance of "smart investing." Investors should look for things that are obvious, but not apparent: such companies may have some unique qualities to them, but these qualities do not become apparent until "years and years and years."

In a later CNBC segment with Scott Wapner, Icahn discussed his views on Herbalife Ltd. (HLF). As of Aug. 31, the activist investor owned 19,611,529 shares of the consumer packaged goods company, representing 21.11% of total shares outstanding. Even though the company has high short percentage of float, Icahn still sees high value potential with Herbalife, a company that offers jobs around the world, including China. The CNBC segment displays that Herbalife's healthy returns since its 2016 low is 45%.

As of Oct. 17, Herbalife is a triple buy: the company has a 6.6% rate of share buyback, and has four guru buys and one insider buy in the past three months.

Disclosure: No position in Herbalife

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This article first appeared on GuruFocus.

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