One of the coolest things about Wall Street is the ability to follow in the footsteps of ultra-successful investors. Unlike the secretive world of other investments, the stock market has regulations requiring large investors to disclose their holdings to the public on a quarterly basis via the SEC Form 13F. This disclosure applies to all institutional money managers with over $100 million in qualified assets.

#-ad_banner-#Following the 13F filings of these money managers can provide smaller investors both direct and indirect guidance as to how to invest. Direct guidance can be gleaned by following what holdings are new, added, or lessened during the quarter. Indirectly, investors can observe the movement of money into and out of sectors and industries to obtain inside knowledge of burgeoning market trends.

One of my all-time favorite mega-investors to follow is Carl Icahn. At 80 years old, Mr. Icahn has built his reputation, and over $16 billion in personal wealth, as an activist shareholder and buyout specialist.

Icahn has most recently been in the news as being a candidate for Treasury Secretary under Donald Trump. However, it is unlikely he will accept any official government position beyond informal advisor. He explained to FOX Business Network, “I would definitely never take a formal role. It is not my nature anyway. I am 80 years old. I never reported to anyone in my life. That is not my nature. I could never get involved in Washington, into the bureaucracy of that.“

Icahn’s most recent winning moves in shareholder activism have been the breakups of Manitowoc Company (NYSE: MTW) and Manitowoc Foodservice (NYSE: MFS), and eBay (Nasdaq: EBAY) and PayPal (Nasdaq: PYPL). Both of these companies were good breakup candidates due to the diverse nature of their businesses, and the spinoffs are expected to increase shareholder value for all four companies.

But the real reason I like to follow the Carl Icahn philosophy is to see his trader-like characteristics. He cuts his losses and adds to the winners, following basic investment rules. This is very different from the buy-and-hold-forever strategy favored by other large stock market investors.

Most recently, he has been turning bearish and reducing his long exposure to stocks from just over $20 billion to $19.8 billion last quarter. The decrease represents around a 2% reduction in overall long holdings.

Carl took his losses in two energy-focused companies, Chesapeake Energy (NYSE: CHK) and Transocean (NYSE: RIG). Despite having a 9% ownership stake in Chesapeake and a 6% ownership in Transocean, he dumped his entire holdings in both firms.

This move is likely signaling that Icahn is not expecting ANY upside for the energy sector in the foreseeable future.

Icahn was one of the first Trump supporters and a huge believer that a Trump presidency would be very bullish for the stock market. It is estimated that he made $700 million on the day Donald Trump was elected President. Also, Fortune estimates that Icahn bullishly invested an additional $1 billion within the next free trading sessions after the election.

Carl Icahn’s latest 13F filings reveal that he is long nearly $20 billion in 19 U.S. based stocks. While dumping energy stocks, he’s ramped up his holdings in a handful of names.

What Is Icahn Investing In For The Future?
The first move I noticed is how Icahn ramped up his holdings in Herc Holdings (NYSE: HRI) by 200% in the third quarter. Herc was spun off of Hertz Global Holdings (NYSE: HTZ) in early 2016. The company decided it was smart to divide its equipment rental business from its vehicle rental core competency. Herc shares have soared over 16% since the spinoff. However, it is critical to note that Icahn has been selling his stake in the parent company, Hertz Global, to the tune of a 79% reduction in the second quarter.

Over the last few years, Icahn is best known for his defense of Herbalife (NYSE: HLF) against short seller Bill Ackman. Ackman believes that the company is an illegal pyramid scheme and holds an enormous short position on the shares. While Ackman has been shorting, Icahn has been buying, increasing his holdings by 15% during the last quarter. While this may not seem like much, Icahn currently owns just over 23% of Herbalife’s float and has the corporate board’s permission to own up to 50% of the company.

I believe that every investor can make similar successful moves in their own portfolio by following Icahn’s three key investing beliefs.

Think Like A Long-Term Trader
Do not become married to a stock or an idea in the stock market. Be prepared to admit you are wrong and take your losses if the stock does not perform as expected.

Be Fearless, But Not Stupid
Icahn’s investment history is full of examples of fearlessness without stupidity. When Bill Ackman shorted Herbalife and published an expertly researched paper as to why he was correct, most investor assumed Herbalife was finished. However, Icahn fearlessly used the selling as a buying opportunity, earning serious profits.

Do Not Over-Diversify
Investors often make the mistake of over-diversifying in the stock market. Over-diversification can mitigate risk, but it also prevents you from earning outsized gains. Concentrate your holdings in your best ideas then diversify the remainder.

Risks To Consider: Despite his overall success, Icahn’s portfolio has been in the red over the last 36 months. Always do your due diligence before purchasing a stock. Do not follow Icahn — or any investor — blindly.

Action To Take: Start following Carl Icahn’s and other large investors 13F filings on a quarterly basis. Note what is bought, sold, and any trends that may be apparent from a quarter-to-quarter perspective. Use these filings to find investment ideas for your stock market portfolio.

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