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3 Ways To Profit From Incompetent CEOs

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In an interview with the financial press, legendary investor Carl Icahn bemoaned about the quality of chief executive officers for publicly traded companies in the United States. A famous saying of Warren Buffett is to buy companies that a fool can manage, as that will eventually happen.

With such a pessimistic outlook on the level of leadership in corporate America by two of the best in history, here are three ways investors can profit for the future.

The most obvious is to invest with Warren Buffett and Carl Icahn.

Buffett runs Berkshire Hathaway (NYSE: BRK-A). Icahn is the head of Icahn Enterprises (NASDAQ: IEP). Both stocks have done very well. If you agree with the view of two legendary billionaire investors, why not invest with them to profit from the foibles of corporate executives?

The next way is to buy shares of publicly traded private equity firms, such as The Carlyle Group (NASDAQ: CG) and KKR (NYSE: KKR).

Related: 3 Unique Income Investments

Private equity firms like these seek out companies that can be bought, fixed up and then sold for a profit. What makes the company more appealing is the private equity firms bring in superior management. If there was excellent leadership, the firms should not be undervalued enough so that private equity firms can book a profit when selling.

The third way is to follow Professor Sydney Finkelstein from the Tuck School of Business at Dartmouth -- find companies to short.

Every year, Finkelstein issues a list of the worst CEOs. With Eddie Lambert of Sears and Ron Johnson, former head of JC Penney, on the list for 2013, it is good place to start with shorting stocks. Further research should be done with The Official Board, which has bountiful resources on executives. The Official Board provides fresh organizational charts of 40,000 of the largest corporations, with much useful information.

Between Professor Finkelstein and The Official Board, there is a good start towards rounds of excellent profits from shorting poorly run companies like JC Penney and Sears. Long or short, there are ways for investors to gain from inferior chief executive officers. Warren Buffett and Carl Icahn have made billions from this mode of investing.

Posted-In: Carl Icahn Warren BuffettLong Ideas Short Ideas Technicals Management Trading Ideas Best of Benzinga

 

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