For now, it seems Bill Ackman is getting the better of fellow activist investor Carl Icahn. After the recent smackdown on CNBC between both billionaire investors over Herbalife Ltd. (NYSE:HLF), the stock observed a decline of ~20% in the last 20 days. I think the “zero target” that Ackman presented initially is impossible unless the government intervenes and shuts this company down. Icahn, on the other hand, won’t confirm if he owns any shares in Herbalife. According to the Wall Street Journal, he made a small position in this stock at the same time as Loeb. Looking from an investing perspective, I would not advise investing in Herbalife for now as the billionaires’ ego clashes are making it a battleground stock.
Speaking of Carl Icahn, this investor has shown active interest in oil and energy stocks. About 32% of his portfolio is dedicated to this sector. This year, he invested in Transocean Limited following his last year's investment in Chesapeake Energy Corporation (NYSE:CHK) Corporation and CVR Energy, Inc. (NYSE:CVI) Incorporated. I have picked up three stocks in which Carl holds significant positions, and all three of them look strong with their long term fundamentals intact. Two of them belong to the basic materials sector, and the third is a company that provides internet subscription services. Let's discuss them in detail:
|Name of Company||Percentage growth in stock price YTD (~)||Carl Icahn's Holding in Company's Total Capital|
|Netflix, Inc. (NASDAQ:NFLX)||93.41%||10%|
|Chesapeake Energy Corporation (NYSE:CHK)||20.48%||9%|
|CVR Energy, Inc. (NYSE:CVI)||10.75%||82%|
Source: Yahoo! Finance
Netflix, Inc. (NASDAQ:NFLX)
After posting a good 4Q12, strong guidance for 1Q13, and strong content deals, the stock price of Netflix has seen an upward trend. No one will be more pleased by this rise than Carl Icahn, who purchased his stake in this stock for only ~$321.4 million, a stake which is now valued at ~$970 million. In 4Q12 the company’s revenue rose by ~8% y/y and the total count of global subscribers reached ~33 million. Domestic streaming for the quarter led to an increase of ~2 million subscribers.
Netflix’s management expects that the company will continue to give a similar performance at least for the next two quarters. As per the guidance for 1Q 2013, the total number of domestic streaming subscribers is expected to be ~28.5 million, up from the current ~27.2 million. The targeted increase in the number of subscribers is achievable, considering the new content deals it recently entered into with Time Warner and Flavor Unit Entertainment. Time Warner has agreed to show some of the famous cartoon series on Netflix that include episodes of Green Lantern, Robot Chicken, etc. As per the deal, the content will be available on Netflix from this April onward. The deal will prove to be a boon for the company as Time Warner's past success is well known, with its hit series like Ben 10, Johnny Bravo, etc. The company also entered into an agreement with Flavor Unit that gives it the rights to stream movies produced by Flavor Unit after they are released in theaters. It is to be noted that it is the same production house that produced hits like Beauty Shop, Bringing Down the House, etc.