Carl Icahn had big things in mind when he invested in Netflix Netflix last year at the behest of two hungry young investors helping manage his money, but even the irascible billionaire admits that a 457% gain exceeded his expectations. His response to the windfall is a lesson for investors big and small.
Icahn revealed last week that he slashed his Netflix holdings by more than half – over the objections of the two money managers who prompted the initial investment, son Brett Icahn and David Schechter – even though he still believes the stock could go higher.
"[A]s a hardened veteran of seven bear markets I have learned that when you are lucky and/or smart enough to have made a total return of 457% in only 14 months it is time to take some of the chips off the table," Icahn wrote.
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Considering the broader market's big gains – the S&P 500 sits near record levels and is up almost 24% this year – and the tremendous advances in certain stocks like Netflix, investors are no doubt wondering if they should follow Icahn's lead or let their winners run.
Most professional money managers, like Icahn, will tell you that a blanket "let your winners run" philosophy is no kind of investment strategy. The general argument is that prudent investing requires a price target and the discipline to hit eject (or at least pull out profits) when a stock reaches that figure.
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