Billionaire Carl Icahn Plans Shake Up of AIG, Halvorsen Reveals Yet Another Energy Bet, Plus Two Other Moves

Individual investors can catch a glimpse of hedge funds’ equity positions by analyzing their quarterly 13F filings. The batch of 13Fs for the quarterly period that ended December 31 will be fully available on February 16, so investors will be able to take a look at the stocks hedge funds have put their faith in during the fourth quarter. However, one should remember that 13G, 13D, and Form 4 filings can be equally important for those tracking hedge funds’ moves, because they tend to disclose more up-to-date insights about some of these funds’ largest positions. Having said that, the following article will discuss four recent filings submitted by billionaires Carl Icahn, and Andreas Halvorsen, as well as two other hedge fund managers tracked by Insider Monkey.

At Insider Monkey, we track around 730 hedge funds and institutional investors. Through extensive backtests, we have determined that imitating some of the stocks that these investors are collectively bullish on can help retail investors generate double digits of alpha per year. The key is to focus on the small-cap picks of these funds, which are usually less followed by the broader market and allow for larger price inefficiencies (see more details about our small-cap strategy).

In a Schedule 13D filing, Nathaniel August’s Mangrove Partners reported owning 8.18 million shares of Atlantic Power Corp (NYSE:AT), which constitute 6.7% of the company’s outstanding stock. That compares to the ownership stake of 6.19 million shares disclosed through the fund’s 13F for the September quarter. The 13D filing also disclosed that Mangrove felt the shares of the power company were undervalued and represented an attractive investment opportunity at the time of purchase, so let’s try to find out why Mangrove finds Atlantic Power’s shares so attractive at the moment.

Atlantic Power Corp (NYSE:AT) operates a fleet of power generation assets in the United States and Canada, primarily selling electricity to utilities and other large commercial customers under long-term power purchase agreements. PPAs are intended to reduce the company’s exposure to fluctuations in commodity prices, but the shares of Atlantic Power are still down by 34% over the past 12-month period. It is worth mentioning that the company’s PPAs will not begin to expire until December 31, 2017 at the earlier, so Atlantic Power is well-positioned to generate steady revenue in upcoming years. Even more to that, Moody’s Investors Services upgraded the company’s corporate debt rating to B1 from B2 in October 2015, which makes us believe that Atlantic Power is financially healthy as well. However, with the sale of its Wind Projects to one of Sunedison Inc. (NYSE:SUNE)’s yieldcos for $335 million in 2015, the company has less renewable energy projects in its portfolio, while its customer base has become more concentrated. 12 hedge funds from our database had stakes in the company at the end of September, amassing roughly 14% of its shares. Joel Ramin’s 12 West Capital Management holds a position of 7.31 million shares in Atlantic Power Corp (NYSE:AT) as of the end of the third quarter.

Let’s head to the next two pages of this article, where we discuss three other freshly-submitted filings.

According to a freshly-submitted filing with the SEC, Carl Icahn of Icahn Capital LP, who has been calling for a breakup of American International Group Inc. (NYSE:AIG), believes that the alternative plan presented by the company’s CEO last week “was inadequate” and is in the process of “assembling a slate of directors to shake up the company”. Let us remind you that the activist investor urged the insurer to split into three separate companies last year, focusing on life, property-casualty and mortgage coverage insurance. The de-conglomeration plan might allow the insurer to avoid the government’s systemically important financial institution (SIFI) designation, which generally adds extra regulatory costs and lowers companies’ return on capital. Last week, American International Group Inc. (NYSE:AIG)’s CEO revealed plans “for a more patient approach of simplifying the company” by having an initial public offering of a 19.9% stake in the mortgage guaranty business United Guaranty Corporation, selling a broker-dealer operation called AIG Advisor Group to Lightyear Capital LLC and PSP Investments, and considering other possible divestitures. AIG also announced plans to reduce expenses by $1.6 billion within two years, but the activist investor clearly believes he has proposed a more efficient idea of how to unlock shareholder value.

Icahn, who owns 42.75 million shares of AIG, which account for 3.46% of the company’s outstanding shares, intends to provide a list of possible board member candidates by the end of next week. AIG shares are up by nearly 10% over the past one-year period despite having lost 9% thus far in 2016. Earlier this week, BMO Capital Markets downgraded the stock to ‘Market Perform’ from ‘Outperform’ and lowered its price target on it to $62 from $68, suggesting that the company’s freshly-announced strategic plan stipulates operational and profitability targets that might not be met. However, the financial hub’s analysts believe that a breakup of AIG “is not in shareholders’ best interests today”. Billionaire John Paulson of Paulson & Co owns 14.60 million shares of American International Group Inc. (NYSE:AIG) as of September 30.

As revealed by a Schedule 13G filing, Andreas Halvorsen’s Viking Global acquired a new stake of 54.82 million shares of Encana Corporation (USA) (NYSE:ECA), which make up 6.5% of the company’s outstanding shares. This is yet another energy bet from the billionaire investor, who recently disclosed new stakes in Range Resources Corp. (NYSE:RRC), Southwestern Energy Company (NYSE:SWN), and Cabot Oil & Gas Corporation (NYSE:COG). Going back to Encana Corporation, the North American energy producer has seen its shares decline by 69% over the past 12 months. Several financial hubs recently issued new reports on the Canadian-based oil and gas company, which reflect the sustained low commodities price environment. BMO Capital Markets lowered its rating on the stock to ‘Market Perform’ from ‘Outperform’ back in December, citing depressed commodity prices. Earlier this month, Morgan Stanley downgraded Encana Corporation (USA) (NYSE:ECA) to ‘Equal Weight’ from ‘Overweight’, mainly due to the investment bank’s lower commodity outlook. Meanwhile, Encana anticipates that 95% of its 2016 capital will be invested in four core assets, which are expected to produce between 260,000 and 280,000 barrels of oil equivalent per day (BOE/d). These four assets account for at least 75% of the company’s total expected production. Encana had roughly 48,000 barrels per day of expected 2016 oil production hedged in mid-December, at an average price of $58.85 per bbl. A total of 27 hedge funds from our system had positions in the company at the end of the third quarter, accumulating nearly 8% of its outstanding shares. Todd J. Kantor’s Encompass Capital Advisors acquired a 5.24 million-share stake in Encana Corporation (USA) (NYSE:ECA) during the third quarter.

According to a separate 13D filing, Paul Singer’s Elliott Associates L.P. and its affiliates have economic exposure to Alcoa Inc. (NYSE:AA) of approximately 7.5%. This includes 86.20 million shares of common stock, including 8.60 million shares underlying exercisable stock options, and additional economic exposure of 0.9% of shares in the form of cash settled swaps with respect to 12.00 million shares. This compares with the 7.4% economic exposure revealed by a recently-filed 13D filing discussed by Insider Monkey (read more details).

Most importantly, the filing discloses that Alcoa and Paul Singer’s family of entities have reached an agreement that stipulates an increase in the size of Alcoa’s Board of Directors to 15 members, with Ulrich (Rick) Schmidt, Sean O. Mahoney, and John C. Plant joining on the Board. The aluminum producer plans to separate its Value-Add and Upstream businesses into two independent public companies in the second half of 2016. Moreover, the three freshly-nominated Directors will be appointed to the Board of Directors of the Value-Add company. 46 smart money investors tracked by Insider Monkey were shareholders of the company at the end of September and owned almost 13% of its outstanding shares. Seth Klarman’s Baupost Group added a 52.27 million-share position in Alcoa Inc. (NYSE:AA) to its portfolio during the July-to-September period.

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