Billionaire Activist Carl Icahn’s Top Moves in Q4 Include Apple, AIG, Xerox & More

When it comes to following activist investors to generate market-beating returns, billionaire Carl Icahn probably is one of the best choices, since he has an exceptional track record of successfully unlocking shareholder value at many companies and the majority of his campaigns are widely followed in the media and by other investors. However, lately, the returns of Mr. Icahn’s Icahn Capital have been lagging, mainly due to high exposure to the energy sector, which plunged alongside a drop in oil prices. According to our analysis of the investor’s 13F filings, his 20 positions in companies with market caps above $1.0 billion posted a negative weighted average return of over 17% for 2015. Icahn Enterprises LP (NASDAQ:IEP), which represents the largest holding in Icahn’s equity portfolio worth $7.17 billion and amassing almost a quarter of the total portfolio value, dropped by 34% in 2015. Given that Icahn has just released his 13F filing for the fourth quarter, let’s take a look at some of the moves that the investor made during the fourth quarter.

Mr. Icahn is one of the investors we track as part of our small-cap strategy. Through extensive research, we determined that a good strategy to beat the broader indices is to follow the most popular picks among hedge funds and other institutional investors. The key is to focus on the small-cap picks of these funds, because they are usually less followed and allow for more pricing inefficiency (see more details here).

One of Carl Icahn’s interesting moves was trimming his exposure to Apple Inc. (NASDAQ:AAPL). According to the 13F filing, the investor owns 45.76 million shares of the tech giant, down by 7.00 million shares over the quarter. The stock inched down by around 5% during the fourth quarter and the reduction does not suggest that Icahn changed his sentiment towards the stock, but it’s more likely that the investor decided to pick some profits from a long-term investment in Apple Inc. (NASDAQ:AAPL). The $4.82 billion position is still the second-largest in Icahn’s equity portfolio as of the end of December, amassing 16.36% of the equity portfolio’s value. Since the beginning of the year, Apple’s stock has lost around 8%, amid an overall market decline and rising concerns about a slowdown in iPhone sales growth, which was actually confirmed in the company’s latest financial results, which showed the lowest growth since the launch of the iPhone. Among the investors we track, Apple Inc. (NASDAQ:AAPL) registered flat popularity in the fourth quarter, with 133 funds holding long positions as of the end of December, but the total value of their positions advanced to $1.77 billion from $1.74 billion during the fourth quarter, despite the aforementioned 5% dip in the stock during that time. However, due to an increase in the popularity of other stocks, Apple Inc. (NASDAQ:AAPL) slid to the seventh spot in our ranking, down from the second position it held at the end of September.

As Icahn launched a campaign to split American International Group Inc (NYSE:AIG) into three companies, he boosted his position in the company by 40.88 million shares to 42.24 million shares worth $2.62 billion. In October, the investor sent a letter to the company’s CEO Peter Hancock, in which he said that AIG has underperformed its peers due to its large size and urged for a separation of its life and mortgage insurance subsidiaries. However, even though Icahn discussed the issue with the CEO several times since the letter, the management and Board did not express a willingness to proceed with the split. Last week, Icahn said that he reached an agreement with American International Group Inc (NYSE:AIG) to appoint his nominee to its Board of Directors in May. At the same time, the company reached a similar agreement with Paulson & Co. to appoint John Paulson to the Board. Another activist bullish on American International Group Inc (NYSE:AIG) is Barry Rosenstein of JANA Partners, which reported a new position containing 4.25 million AIG shares in its latest 13F filing.

On the following page, we are going to discuss three other bullish moves made by Icahn during the last three months of 2015.

Cheniere Energy, Inc. (NYSEMKT:LNG) was one of the worst performers in Icahn’s equity portfolio last year. The investor initiated a stake during the second quarter, while the stock lost over 50% in the last nine months of 2015. However, during the fourth quarter, amid a 23% drop in the stock, Icahn acquired 4.13 million shares of Cheniere Energy to lift his holding to 32.68 million shares worth $1.22 billion as of the end of December. After amassing a substantial position in Cheniere Energy, Inc. (NYSEMKT:LNG), Icahn obtained two Board seats and in December the investor pushed the Board to fire Cheniere’s Chairman and CEO Charif Souki, who co-founded Cheniere in 1996. Even though the stock has lost a lot of ground in the last couple of years, Cheniere represents a good long-term bet due to its seven LNG processing plants that are currently under construction and will provide the company with substantial cash flows under the contracts it has with several big companies, such as Royal Dutch Shell plc (ADR) (NYSE:RDS.A). Another shareholder of Cheniere Energy, Inc. (NYSEMKT:LNG) is Seth Klarman‘s Baupost Group, which increased its position by 3.42 million shares to 26.09 million shares during the fourth quarter.

In Xerox Corp (NYSE:XRX), Icahn reported a new stake containing 86.44 million shares worth $918.82 million. Icahn first disclosed a 7.1% position in Xerox in November and said at the time that the stock was undervalued. At the end of January, Xerox announced that it will separate into two companies, involved in Business Process Outsourcing and Document Technology. In addition, Xerox Corp (NYSE:XRX) reached an agreement with Icahn, under the terms of which, the activist will appoint three nominees to the Board of the Business Process Outsourcing company, which will include the services segment of Xerox Corp (NYSE:XRX). Another shareholder of Xerox is Cliff Asness’ AQR Capital Management, which owns 12.97 million shares of the company as of the end of December.

Finally, in Hertz Global Holdings Inc (NYSE:HTZ), Icahn surged his position by 22% during the fourth quarter, declaring ownership of 63.71 million shares valued at $906.58 million in his 13F filing. Last year, the stock lost 43% and is down by more than 40% year-to-date, despite the involvement of activist investors who managed to replace the CEO in 2014. Hertz Global Holdings Inc (NYSE:HTZ) is one of the largest car rental companies in the world and one of the largest equipment rental companies in the U.S and Canada. Due to the industry consolidation witnessed a couple of years ago, the car rental industry was narrowed to a small number of rental companies, which allows Hertz to focus on its profitability rather than spending to increase market share. The decline of the stock might lead to more pressure from Icahn, although the investor has not disclosed any plans regarding the company. At the same time it’s important to mention that another activist that was involved in Hertz Global Holdings Inc (NYSE:HTZ), Barry Rosenstein, decided to dump the investment, with JANA Partners having unloaded its entire stake of 39.19 million shares during the fourth quarter.

Disclosure: None