Investing With The Gurus – Carl Icahn’s Updated Portfolio

Guru billionaire Carl Icahn has been in the news for many reasons in the past, but more recently (5 years or so ago), he made headlines as a result of a rather public and brutal battle of the hedge funds with rival Bill Ackman of Perishing Square Capital Management. News watchers might recall that the spat was over health food and lifestyle player Herbalife Nutrition Ltd (HLF), which company Ackman branded an elaborate “pyramid scheme”. Icahn, one of the biggest institutional investors in HLF (with over 35M shares held) called his fellow guru a “liar”. Needless to say that the slug fest continued for some time…and the rest is history, with Icahn claiming a $1B win over Ackman as the later exited his HLF position earlier this year (March 2018).

In August this year, Icahn filed his quarterly SEC 13F returns for Q2-2018. So, what can we learn from analyzing the 13F data?

The Portfolio Dissected

The 13F filings indicate a total Q2 portfolio value of slightly over $24B ($24,143,868,000) from the previous value of $20.12B – an almost 20% increase, spread over 43 holdings (21 unique names).

On a sectorial basis, 57% of the portfolio is invested in Industrials, with Energy representing the only other double-digit (21%) exposure. With 8% weighting, Consumer Non-Cyclicals are the third largest position in the portfolio. Technology, with 7%, rounds up the Top-4 sector preferences for Guru Icahn.

The Guru established 5 new positions, compared to his Q1 holdings, while also lightening up on two existing holdings. He also increased his positions in 7 holdings, including the target of his battle-of-the-Hedge-Funds with Ackman, HLF.

During Q2, Icahn increased his HLF stake from 22.87M shares in Q1 to 35.22M shares in the most recent reported quarter. The Guru also increased his holdings of an affiliated company, Icahn Enterprises LP (IEP) by approximately 3M shares, to nearly 11.82M shares (Q2 9M). He also boosted his position in Newell Brands (NWL) by another approximately 3M shares, to 33.29M shares (Q2 30.27M).

In Q2, Icahn lightened his Cheniere Energy Inc (LNG) position by 9M shares – from 32.68M shares to 23.68M shares.

Among the five new positions established by Guru Icahn include AmTrust Financial Services Inc (AFSI) – 18.42M shares; Energen Corp (EGN) – 5.19M shares; Dell Technologies (DVMT) – 2.38M shares; VMWare Inc (VMW) – 2.27M shares and Cigna (CI) – 503,380 shares.

Of the Top-10 holdings, there was no major turnover in CVI, FCX, NAV, XRX, ARII and HTZ.

Icahn’s Q2 portfolio appears to be very concentrated, with his Top-10 holdings representing over 86% of his total portfolio. IEP, CVR Energy (CVI) and HLF are the three largest holdings.

The above pie-chart puts the Top-10 holdings in greater perspective, with Icahn’s associated company IEP dominating the Top-10, with 57% of it’s composition. CVI comprises of 13% of the Top-10, with HLF the only other holding coming close to double-digits – 9% of the Top-10.

Key Takeaways

Clearly Carl Icahn’s Q2 portfolio pivots around Icahn Enterprises LP (IEP), which accounts for the lion’s share (48.97%) of the total portfolio. This is a diversified holding company that has interests in a broad number of sectors, including Automotive, Energy, Gaming, Mining, Railcar, Food Packaging, Metals, Real Estate and Home Fashion.

IEP has several subsidiaries, including some of the names in the Top-10 list, CVI and ARII. IEP is, in turn, controlled by Icahn as a majority shareholder who, along with his other associates owns 90.8% of IEP

One key takeaway therefore would be the statement: “As IEP goes…so does Icahn’s Portfolio”.

However, when we assess the 1-year performance of some of the individual names in the Top-10 list, we see that names like CVI, HLF and LNG have fared much better than Icahn’s flagship IEP. Perhaps, if you wanted to invest like Guru Icahn, a good start might be to take positions in the Top-4 of his Top-10 holdings.

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Also Read: Why You Should Look Away from the “Financial FANG’s” $JPM, $BAC, $C, $WFC

Author does not have investment in stock discussed in this article.

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