Billionaire investor Carl Icahn says red-hot inflation won't derail his investment approach — but thinks some stock valuations are 'out of this world'
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- Carl Icahn told CNBC Thursday he won't let problems with inflation bother his investment philosophy.
- The legendary investor agreed there are bubbles in the market, saying some stock valuations are "out of this world."
- You don't have to be a genius to understand high levels of stimulus drives high inflation, he said.
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Soaring inflation isn't prompting billionaire investor Carl Icahn to rethink his investing strategy, but he still believes some stock valuations are lofty.
"I do think that the way it's going, there's going to be problems with inflation and a number of other things," he told CNBC in an interview Thursday. "But I certainly don't let it bother my investment philosophies, activism, and I just keep going."
"But we keep a pretty big hedge on," he added.
The Icahn Enterprises boss, who has an estimated net worth of $23 billion, is a longtime activist investor. Activist shareholders typically build stakes in companies seen as undervalued, and then demand management changes that could work in their favor.
When asked whether he thinks there are bubbles in the stock market, or whether it might be inflated, Icahn said: "Yeah, very much."
"I do think that some of the multiples are crazy, that some of the investments are just out of this world."
A multiple is a calculation of value made by dividing, say, the market price for a stock by another piece of data from a company's financials. Investors use these as an indication of whether an asset is overvalued or undervalued.
Icahn said he doesn't think massive trouble is in store for the US economy in the near term.
Still, he said "you don't have to really be a genius" to realize that the Federal Reserve's pumping of money into the economy during the pandemic will create inflationary trouble.
US inflation leaped 7% in December, the strongest gain since 1982. "I'm surprised it hasn't happened sooner," Icahn said.
He suggested no one can predict when the economy might see real trouble.
"Eventually, who knows? I think it's gonna be a little tough," he said. "It could be now, and it could be three years from now."
The billionaire investor, who owns the controlling stake in Icahn Enterprises, said he was happy with the conglomerate's performance last year.
He shared that its net asset value rose $1.8 billion in the first three quarters of 2021. "And that's with having a lot of hedges on," he said.
Another notable investor this week provided a more bearish prediction for the stock market, and advised against investing in US equities. Jeremy Grantham, the market historian who predicted the last three market bubbles, said Thursday that the S&P could crash 50% after the fourth "superbubble" bursts.