Activist investor Carl Icahn expressedconcern on equities as he perceived the possibility of a “big drop” in the stock market
“I am very cautious on equities today. This market could easily have a big drop. Very simplistically put, a lot of the earnings are a mirage. They are not coming because the companies are well run but because of low interest rates,” said Icahn during the Reuters Global Investment Outlook Summit today.
Stock markets react
Frightened by Icahn’s forecast, the stock markets declined after hours on Monday. The S&P 500 declined 0.43% to 1,790.36 points while Nasdaq dropped 0.99% to 3,946.52 points. The Dow Jones Industrial Average (DJIA) reached an all time high at 16,000 points, but lost some of the gains to 15, 968.95 after the closing bell.
On Monday, the stock price of social media companies including Facebook, Inc (NASDAQ:FB), Twitter, Inc (NYSE:TWTR), and Linkedln Corp (NYSE:LNKD) plummeted by 6.49% to $45.83 per share, 6.46% to $41.14 a share, and 3.89% to $222.07 per share, respectively.
During the conference, Icahn also emphasized that it is difficult to predict the movement of the stock market over the short-term due to many factors.
Icahn clarifies view on stock market
The activist investor issued a statement clarifying his statements during the summit. He made it clear that Reuters was accurate in reporting that he was completely concerned regarding the level of the stock market. He also emphasized, “But I also made it clear on the conference call (and I believe as Reuters reported it), that it is almost impossible to predict what a market will do in the short term. There are too many variables.”
Icahn further explained, “Often when we are concerned about the market, we hedge to some extent and this is one of those times. Interestingly, our investment funds had an annualized return of approximately 27% since January 1, 2009, and that return would have been greater if we had not hedged. As I have often said, picking short term moves in the market is like predicting how many sevens the ‘hot’ dice player will continue to roll.”
No plans to walk away from Apple
During the summit, Icahn also indicated that he has no intention to fight the management of Apple Inc (NASDAQ:AAPL), and he has no plans of walking away from his investment in the iPhone and iPad maker. As of September 30, Icahn owns more than 3.8 million shares of the tech giant.
He also emphasized that Apple s not a bank, the company should carry out a large shares repurchase program, and take advantage of its cash to become more productive. Icahn said, “Apple is not a bank and it should not be run like a bank because investors did not invest in a bank. Apple has all this money, they should be using it.”