The most comprehensive data on what hedge funds and other major investors own comes in the form of 13F filings. These filings are made public six to seven weeks after the end of a quarter and disclose what many of the portfolio’s long equity holdings were at that time. Even with the time delay, we have found that it is possible to formulate investment strategies based on the information found in 13Fs. The most popular small cap stocks among hedge funds have tended to outperform the S&P 500 by 18 percentage points per year (learn more about our small cap strategy). Of course, 13Fs are also a list of “stock picks” from top investors and these stocks can be researched in more detail if they seem attractive.
Carl Icahn has had a busy month and a half. Since the beginning of 2013, the billionaire activist investor has reported a large stake in Transocean LTD (NYSE:RIG), booted CEO Aubrey McClendon out of Chesapeake Energy Corporation (NYSE:CHK), gotten a big win for his portfolio as Netflix, Inc. (NASDAQ:NFLX) crushed expectations, and is currently dismantling fellow billionaire Bill Ackman’s short position in Herbalife Ltd. (NYSE:HLF) following a charged, attention-getting confrontation with Ackman on CNBC. Here are some investment themes that stand out when comparing his 13F for the end of December 2012 to previous filings:
Hated energy companies. Icahn initiated a position of almost 6 million shares of Transocean, the contract driller which has been partially blamed for the Deepwater Horizon disaster and whose stock price has remained low as investors express concern over the deepwater drilling industry. He has since reported ownership of over 20 million shares of the company, giving him an investment of over $1 billion. Transocean trades at 12 times analyst consensus for 2013, and the five-year PEG ratio is 0.7. Omega Advisors, managed by fellow billionaire Leon Cooperman, is another major shareholder of Transocean (find Cooperman's favorite stocks).
We’ve also mentioned Icahn’s position in Chesapeake, which he first reported early last year. The company’s CEO had been criticized for questionable personal business deals, as well as being too aggressive in expanding Chesapeake’s asset base; between management and cash flow issues the share price had been plunging when Icahn had announced his stake. The stock is up 23% year to date, signaling how satisfied the market is to see McClendon gone. Icahn had added shares of Chesapeake during Q4 2012 as well.
Icahn also increased his holdings in Netflix: