Small and mid-cap stocks do not get as much coverage from bankers and third-party analysts, often leaving them less efficiently priced versus larger stocks. Hedge funds often dedicate their research teams to analyze these lower-valuation stocks, oftentimes earning substantial alpha from their due diligence. We’ve come up with our own small-cap strategy based on information obtained from the funds we track; since releasing the basket last September, our picks have gained over 29% (learn more here). Legendary investor Carl Icahn of Icahn Capital recently released his fund’s 13F filing for the last quarter of 2012; read on for our take on his top holdings with market caps between $1bn and $5bn.
CVR Energy, Inc. (NYSE:CVI) has a market capitalization of $4.75bn and has been a favorite of Icahn’s for quite awhile; the investor owns over 80% of the fuel refiner and marketer. His plans were to originally take the company private, but he abandoned that idea last August. An appropriate consolation for him might come in the form of the 120% price appreciation the shares have accumulated since this time last year. CVR takes up a 27% chunk of Icahn’s portfolio. The company recently declared a special dividend of $5.50 a share in January and will issue a new quarterly dividend in Q2 2013 as well, giving CVR Energy, Inc. (NYSE:CVI) an annual yield of 5.5%. Billionaire Jim Simon’s 676,000 shares seems tiny next to Icahn’s position (check out his favorite stocks here).
Icahn’s holdings in the The Hain Celestial Group, Inc. (NASDAQ:HAIN) total to nearly $400mm, which equals slightly over 3% of his $12.9bn portfolio. The health foods manufacturer owns brands like Soy Dream, Almond Dream, and Terra. The stock continues its trend of beating earnings every quarter, repeating the feat once again in February with a 4.3% beat over analyst’s predictions. However, revenue came in under expectations, resulting in a 4.4% drop in share price after the announcement. The Hain Celestial Group, Inc. (NASDAQ:HAIN) started 2013 with an upgrade to Outperform by BMO Capital, citing the company’s agile position to profit from health food trends. Billionaire Israel Englander of Millennium Management owns over 200,000 shares (view his fund’s major positions here).
Mentor Graphics Corp (NASDAQ:MENT) takes up slightly more than 2% of Icahn’s AUM, which works out to a market value of $274mm as of the time of the fund’s filing. Mentor’s return since this time last year is almost equivalent to the market’s, and the beta of 1.1 supports the high correlation. The company supplies electronic design automation tools and is the best of breed in its industry, benefitting from the most diversified customer base. MENT has over 20% to go in order to meet Wall Street’s valuations a year from now. Ken Fisher’s investment in Mentor Graphics Corp (NASDAQ:MENT) tops $29mm (read about his other holdings here).
Which other small-cap bets has Icahn made?