Icahn Enterprises, L.P. (IEP)’s Carl Icahn Wants to Show You the Money

When activists clash!

While Carl Icahn is best known for his widely publicized battles with the boards of Netflix, Inc. (NASDAQ:NFLX), The Clorox Company (NYSE:CLX) and Biogen Idec Inc. (NASDAQ:BIIB), he has also clashed with other activist investors on multiple occasions.

Icahn’s most recent foe is William Ackman, the activist investor who is waging a personal war against Herbalife Ltd. (NYSE:HLF).

William Ackman has claimed that Herbalife, a multi-level marketer of nutritional and skincare products, is a ‘pyramid scheme’ running on inflated numbers. Ackman has been so certain of his accusations that he once held a three-hour presentation denouncing the company, and launched a web page dedicated to his arguments. Icahn disagrees with Ackman and believes that the company has long-term growth potential.

Both men are certainly putting their money where their mouths are. Ackman’s hedge fund, Pershing Square Capital, disclosed that it was shorting approximately $1 billion in Herbalife shares. Icahn responded by buying a 13% stake in the distressed company, which has a total market value of $4 billion.

Regardless of Herbalife’s financial honesty or the sustainability of its multi-level marketing system, the company’s numbers are financially strong, as seen it the chart below.

HLF Revenue TTM data by YCharts

What’s more, Herbalife recently beat earnings estimates handily for its fourth quarter, posting record growth. It also upped its guidance for fiscal 2013.

Yet I firmly believe Carl Icahn’s investment has less to do with Herbalife’s fundamentals and more about forcing shorts mimicking Ackman, a widely followed investor, to panic and cover their positions.

‘Short squeezes’ – where traders shorting the stock rush to repurchase, or cover, their positions, often cause huge rallies. Indeed, news of Icahn’s initial investment initially caused the stock to rally more than 20%.

The Foolish Bottom Line

In the end, investing in holdings conglomerates such as Icahn Enterprises and Berkshire Hathaway have less to do with macro factors and more about your faith in the CEO. Just as some mutual and hedge funds are actively managed by star portfolio managers, Carl Icahn and Warren Buffett have their own approaches to maximizing shareholder value. However, for dividend investors interested in following one of these star investors, Icahn Enterprises, now offering nearly 5% in dividends, is clearly a more attractive choice than Berkshire Hathaway, which does not pay one at all.

The article Carl Icahn Wants to Show You the Money originally appeared on Fool.com and is written by Leo Sun.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

10 Cities with High Demand for Nurses

6 of the Worst Greeting Card Messages Ever Crafted

6 Ways to Make Money in ArcheAge and Build Your Empire

10 Foods To Eat To Lower Cholesterol Levels

The 10 Most Hated Television Characters of All Time

The 30 Worst Halloween Costume Ideas Ever Brought to Horrible Life

10 Vocational Skills in Demand Today with Jobs Waiting to be Filled

10 Best Places to Visit in Central and South America

The 10 Greatest Empires in History Which Nearly Conquered the World

The 6 Cheapest Boarding Schools In America 2015

5 Clear Reasons LoL is Better than DotA, Continues to Rule MOBAs

The Only 9 Teams with a Chance to Win the Super Bowl

The 15 Most Common Phobias in America that Induce Fits of Panic

Top 6 Least Expensive Tourist Destinations in 2014

Jim Goetz, Peter Fenton, Jim Breyer: Top 6 Venture Investors for 2014

Top 15 Billionaires in 2014

5 Pitfalls To Avoid When Buying a Franchise

Top 20 Medical Schools in the US – 2014 Rankings

4 Business Strategies that Turned Jamie Oliver into the World’s Richest Chef

6 Qualities That Make You A Good Team Player

10 High Paying Seasonal Jobs in America this Holiday Season

The 10 Busiest Shipping Lanes in the World

5 Most Valuable Brands in China

The 10 States with Highest Substance Abuse Rates Crippling Their Populace

The Top 10 Things to Do Before You Die That Will Echo for Eternity

The 10 Best Selling Items on Etsy

Top 10 Things to Do in Tokyo, the Greatest City in the World

10 Mistakes on Social Media that Can Harm You and Will Probably Get You Canned

The 10 Best Cities to Find Jobs in 2014

The 10 Most Controversial Songs Of All Time to Hit (and get Banned from) the Airwaves

The 20 Biggest IPOs in US History

The 10 Best Places to Visit in Mexico that Are Beautiful and Safe

7 Bad Habits that Age You Beyond Your Years

The 40 Best Fortune Cookie Sayings That Will Leave You Bemused, Befuddled, or Beguiled

10 Foods to Eat Before a Workout to Make Every Drop of Sweat Count

The 5 Best Documentaries On Netflix You Must See

The Most Heartwarming and Inspirational Story Of This Halloween Season, It Will Make You Cry and Jump For Joy

10 Best Party Songs of All Time to Bring the House Down With

5 New World Order Conspiracy Theories that Will Strangle the World

The 10 Highest Rated Movies of 2014

The 10 Largest Container Shipping Companies in the World

The 10 Largest Armies in the World: Who Should We Be Afraid Of?

Best Warren Buffett Quotes on Money You Need to Hear

The 10 Highest Suicide Rates by Profession

The 20 Most Underrated Movies of All Time

The 10 Fastest Growing Companies in America

The 10 Biggest Outlet Malls in USA

The 5 Most Popular Rap Songs of All Time

The 10 Countries that Eat the Most Meat

The10 Most Expensive Countries to Fly To

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!