Carl Icahn Buys More Herbalife (HLF), Hertz (HTZ), Unloads Energy Stocks

Erstwhile corporate raider and revered activist investor Carl Icahn has been in the news quite a bit over the past few days following fellow billionaire Donald Trump being elected to the office of President. The octogenarian financier has been one of the loudest supporters of Mr. Trump on the Street since the latter launched his campaign. With Mr. Trump getting elected, not only was it a win for Mr. Icahn on the political front, but also on the financial front. Based on his recent disclosures, Mr. Icahn is estimated to have netted a whopping $700 million just on the day that Mr. Trump was announced as the next President. Moreover, according to Fortune, Mr. Icahn also used the opportunity that the markets presented after Mr. Trump’s victory to bet around $1 billion on U.S. equities right after the results were announced, leaving the Trump victory party to make his wagers. Recently, while speaking at the Reuters Global Investment Outlook Summit, Mr. Icahn said that the rally in the U.S markets since Mr. Trump was elected might be overdone in the short-term, but he is bullish on the economy going forward.

While we might not know what Mr. Icahn’s hedge fund Icahn Capital LP bought on results day, we do know what the fund was betting on at the end of the third quarter in anticipation of Mr. Trump’s win. According to Icahn Capital’s recently submitted 13F filing, the fund had long positions in 19 U.S. stocks at the end of September, which in aggregate were worth $19.80 billion at that time. The filing also revealed that Mr. Icahn was unloading energy stocks and betting big on a handful of stocks going into the fourth quarter, as his top-10 stock picks alone amassed over 90% of the value of his portfolio at the end of September. Without further ado, we will now take a look at the five major moves made by Icahn Capital in the third quarter and will discuss how those stocks have performed recently.

 – Related Reading: The 15 Most Famous Carl Icahn Quotes

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Chesapeake Energy Corporation (NYSE:CHK)

Chesapeake Energy Corporation (NYSE:CHK) was a part of Icahn Capital’s equity portfolio from the second quarter of 2012, when the stock still used to trade around the $15 level. After oil prices started declining in mid-2014, Chesapeake Energy Corporation (NYSE:CHK)’s stock began a long downward journey that ended when it hit a low of $1.50 earlier this year. From that low, the stock recovered quickly and broke above the $8 level during the third quarter, which gave Icahn Capital an opportunity to sell its entire remaining stake in the company. Chesapeake recently reported strong numbers for its third quarter, following which SunTrust Robinson Humphrey’s analyst Neal Dingmann released a note in which he reiterated his ‘Buy’ rating and $11 price target on the stock. In his note, Mr. Dingmann wrote that although Chesapeake Energy’s leverage is still higher than its peers and SunTrust forecasts $300 million in cash outflow spend next year, continued operational efficiencies and lower wells costs should further boost the company’s returns and will likely push it to become cash flow positive in 2018.

Allergan plc Ordinary Shares (NYSE:AGN)

– Shares Held By Icahn Capital LP (as of September 30): 425,438

– Value of the Holding (as of September 30): $97.98 Million

Having initiated its stake in Allergan plc Ordinary Shares (NYSE:AGN) during the second quarter, Icahn Capital proceeded to reduce it by 87% during the third quarter. Allergan plc Ordinary Shares (NYSE:AGN)’s stock has tanked by almost 15% in the current quarter and looking at that performance, one can say that the fund made an extremely wise move by substantially reducing its stake ahead of the quarter. 2016 is proving to be quite a dismal year for Allergan, as its mega merger with Pfizer was called off in April and the company has failed to beat the Street’s revenue estimates for the past three quarters. All of these developments have taken a heavy toll on the pharma giant’s market cap, which has eroded by one-third so far this year. On November 3, analysts at RBC Capital Markets reiterated their ‘Outperform’ rating on the stock, but lowered their price target on it to $279 from $300.

We’ll check out three more of Icahn’s stock picks on the next page.

Herc Holdings Inc (NYSE:HRI)

– Shares Held By Icahn Capital LP (as of September 30): 4.31 Million

– Value of the Holding (as of September 30): $145.34 Million

Icahn Capital boosted its stake in Herc Holdings Inc (NYSE:HRI) by 200% during the third quarter, which helped the position jump three spots in the fund’s portfolio to become its 15th-largest holding, in terms of value, at the end of September. Herc Holdings Inc (NYSE:HRI) became an independent publicly-traded entity earlier this year after Hertz Global Holdings decided to separate its equipment rental business via a spin-off. Since the spin-off was completed, Herc Holdings’s stock has appreciated by 16.5%. For its fiscal 2016 third quarter, Herc Holdings reported EPS of $0.11 on revenue of $403.6 million, compared to the EPS $0.69 on revenue of $431.8 million that it had reported for the same quarter of its previous fiscal year.

Hertz Global Holdings, Inc (NYSE:HTZ)

– Shares Held By Icahn Capital LP (as of September 30): 12.94 Million

– Value of the Holding (as of September 30): $519.61 Million

Hertz Global Holdings, Inc (NYSE:HTZ) is one of the stocks in which Icahn Capital seems to have burnt its fingers badly. During the second quarter, the fund lowered its stake in Hertz Global Holdings, Inc (NYSE:HTZ) by 79%. However, it again boosted its holding in the company by 200% during the July-to-September period. Since then, Hertz Global’s stock has tanked by more than 35%, with most of those losses coming in after the company reported terrible numbers for its third quarter on November 7 and issued soft guidance. On November 15, analysts at Morgan Stanley downgraded the stock to ‘Equal Weight’ from ‘Overweight’ and also reduced their price target on it to $30 from $57, which suggests potential upside of 15%.

Herbalife Ltd. (NYSE:HLF)

– Shares Held By Icahn Capital LP (as of September 30): 19.61 Million

– Value of the Holding (as of September 30): $1.21 Billion

Although Icahn Capital increased its stake in Herbalife Ltd. (NYSE:HLF) by only 15% during the third quarter, a recent regulatory filing submitted by the fund shows that it now owns 21.44 million Herbalife shares, or 23.05% of the company’s float. Furthermore, Mr. Icahn has already revealed that he has received permission to acquire up to 50% of Herbalife Ltd. (NYSE:HLF)’s outstanding stock. Herbalife has been in the news constantly over the past couple of years because of the divergent views that two billionaires – Mr. Icahn and Pershing Square’s Bill Ackman – have on it. While Mr. Ackman has been pretty vocal about his dislike for the company’s practices and is still holding on to his massive short position, Mr. Icahn has become increasingly bullish on Herbalife over the past few months, to the extent that he recently said at the Reuters Global Investment Outlook Summit, that the company is undervalued and that “It is going to create a lot of jobs.”

Disclosure: None