Warren Buffett vs. Carl Icahn: Is Berkshire Hathaway or Icahn Enterprises a Better Stock for You?

There are a few stocks that buck the general trend in what might seem like an eclectic, if not random, portfolio across a variety of businesses. However, if the person hosting the show is a famous investor like Warren Buffett or Carl Icahn, this could make sense. But be careful when looking at Buffett’s stocks. Berkshire Hathaway (BRK.A 1.57%) (BRK.B 1.42%) Or Icahn’s Icahn Enterprises (IEP -0.42%) Because you have to really understand what you are buying.

This is not your typical investment.

Typically, when you buy a stock, you are buying a company that has a fairly specific business approach, such as making cars or producing food. Of course, there are large corporations that bring together different companies, but even so, there is usually a glue that holds the logic together.

But in the case of Berkshire Hathaway and Icahn Enterprises, the glue isn’t really about the businesses involved. It’s about character.

Image source: Motley Fool.

These two companies are probably better considered mutual funds because the investment decisions are made by Buffett and Icahn. What matters most is each person’s approach.

You could argue that there is no good or bad time to buy Berkshire Hathaway or Icahn Enterprises because you are actually buying an investment approach. Ultimately, the business within both companies may change over time as holdings are bought and sold.

Berkshire Hathaway’s portfolio today includes a variety of businesses, from insurance to utilities to trains. This is a very difficult company to track if you try to drill down to the minute details of each business unit in which it operates.

Icahn Enterprises isn’t as large as Berkshire Hathaway, but its holdings range from pharmaceuticals to energy to automotive. In addition to the investments it owns, each company also owns a portfolio of stocks, which adds some complexity.

What should I focus on?

Tracking Berkshire Hathaway and Icahn Enterprises is difficult at best, so a better way to invest in either is to focus on how Buffett and Icahn invest. There are some pretty distinct differences.

For example, Warren Buffett likes to buy good companies at reasonable prices. He then takes a hands-off approach, letting the management team he puts in place do their job. The ultimate goal is to collect stable cash flow from operating businesses that can be used to purchase more businesses.

Given Berkshire Hathaway’s success over time, Buffett has earned the nickname the Oracle of Omaha. The important thing is that he is willing to wait for a good buying opportunity, even if he is holding on to cash for a long period of time. But when he sees something he finds valuable, he will make a move, and those moves are often very large.

Carl Icahn’s approach is very different. He is known as an activist investor and basically looks for companies that are struggling for some reason. He then attempts to create value by buying shares or the entire company and implementing changes.

Often this means getting rid of executives, and Icahn puts his own staff in place to ensure he has control of the show. Icahn says that once she feels she’s done her part, she can sell and move on to new goals, hopefully earning a significant profit.

But the big story is that Icahn doesn’t take a hands-off approach in any way shape or form. He got in there and rolled up his sleeves. This is dramatically different from what Buffett is trying to do. If investors are looking at these two stocks, this is what they need to understand.

Who should buy this stock?

Berkshire Hathaway is probably a better choice for conservative investors who focus on diversification and high-quality businesses. Carl Icahn would probably be an interesting choice for the more aggressive types who want to take a contrarian stance.

But you really need to know what you’re buying, or you could end up making investments that aren’t right for you. Sure, Icahn and Buffett are both famous Wall Street giants, but that doesn’t mean what they do will be a good fit for Wall Street. your portfolio.