Even though it’s never a good idea to follow marquee investment managers blindly, it’s a wise idea to engage in fact-checking with them periodically. The highly regarded Carl Icahn is betting big on these companies, and hoping to earn stellar returns from these names.
Carl Icahn has a long history of taking big positions in undervalued firms, and trying to push for a sale or enforce corporate changes to unlock the true value of the company. Let’s take a look at three of his leading technology picks and his possible investment thesis behind them.
Fighting for Dell Inc. (NASDAQ:DELL)
Carl Icahn is trying to outbid the company’s founder Michael Dell to take Dell Inc. (NASDAQ:DELL) private. Michael Dell has already submitted a deal to buy Dell Inc. (NASDAQ:DELL) for $13.65 a share with an investment partner, Silver Lake. The company postponed a shareholders’ vote to buy time for the founder to gather more votes before the final decision takes place. Icahn and Southeastern Asset Management believe that the company’s shares are being sold at a discount to their intrinsic value and wound up making a $14 a share bid for the company.
To finance the massive transaction, Icahn even arranged financing from Jefferies to the tune of $5.2 billion. Icahn specializes in acquiring undervalued assets or troubled firms, and makes changes in the board or management of the company, and finally flips that company for a profit.
The embattled PC maker is in the middle of a heavy secular decline as more and more consumers are opting to use tablets and smartphones for casual connectivity to the Internet, instead of PCs. Some investors have stated that Dell Inc. (NASDAQ:DELL) is worth less than $9 a share, but that shouldn’t concern a long position.
An arbitrage trade, albeit a small one, exists by going long Dell Inc. (NASDAQ:DELL) shares at current prices of around $13.10, which is below the offers on the table from Michael Dell and Carl Icahn, whose offers stand at $13.65 and $14 a share, respectively.
A pick from healthcare
Icahn has a 13% stake in the healthcare information service platform, WebMD Health Corp. (NASDAQ:WBMD). The company has been witnessing solid increases in user traffic across the WebMD Health Corp. (NASDAQ:WBMD) Network, which hit 125.5 million monthly unique users. The company’s total page views were up 6% Y/Y to 2.64 billion page views.
The company increased its guidance for 2013 to $485 million-$505 million in revenue, which represents 3%-7% increase from 2012. In addition, it expects to earn a small profit for 2013 to the tune of $3 million-$11 million, which is great news, as the company had guided for a net loss for 2013 previously.