Warren Buffett and Carl Icahn Teach a Valuable Lesson with Netflix
Warren Buffett once said, “Be fearful when others are greedy, and greedy when others are fearful.” In other words, investors should sell stocks when everyone else is rushing to buy but remember to buy stocks when the crowd is panicking to sell. A textbook example of that timeless piece of wisdom is being seen in today’s market by another well-known billionaire.
Activist investor Carl Icahn disclosed in a filing late Tuesday that his Icahn Enterprises (NYSE:IEP) and affiliates recently sold nearly 3 million shares of Netflix Inc. (NASDAQ:NFLX), reducing Icahn’s holdings to 4.5 percent of shares outstanding from more than 9 percent reported at the end of June. Icahn initially started to sell Netflix shares on October 10, when shares traded between $296 and $307. However, the biggest sale took place on Tuesday, at an average price of $341 per share, shortly after Netflix reported better-than-expected quarterly earnings and issued a cautious tone about its surging stock price.
Late Monday, Netflix reported net income of $32 million (52 cents per share), compared to only $8 million (13 cents per share) a year earlier. On average, Wall Street expected earnings of 47 cents per share. The results sent shares screaming more than 10 percent to an all-time high of $389, but shares turned negative in Tuesday trading as investors pondered a warning in the quarterly letter.