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Billionaire Carl Icahn’s Best Activist Campaigns To Imitate

Activist investing has gained a considerable amount of traction among retail investors for the last couple of years, whereby the trend is to follow renowned activists like Carl Icahn of Icahn Capital LP as they take a sizable position in the companies that they seek to transform. The followers into the stock can simply ride the wagon and reap the value that is created in the wake of the activism. In 2014 alone there were a total of 344 activist campaigns, compared to about 291 in 2013 and less than 30 back in 2000. One long-only event driven fund that follows around 30 activist campaigns at any given time is Kenneth Squire‘s 13D Management. We decided to cross-match the fund’s top holdings against those of one of the best in the activist business, Carl Icahn. Our list includes Hologic, Inc. (NASDAQ:HOLX), Hertz Global Holdings Inc (NYSE:HTZ), Gannett Co., Inc. (NYSE:GCI), Nuance Communications Inc. (NASDAQ:NUAN), Chesapeake Energy Corporation (NYSE:CHK), and Manitowoc Company Inc (NYSE:MTW).

Carl Icahn as viking

Following activist funds like Icahn Capital is important because it is a very specific and focused strategy in which the investor doesn’t have to wait for catalysts to realize gains in the holding. A fund like Icahn Capital can simply create its own catalysts by pushing for them through negotiations with the company’s management and directors. In recent years, the average returns of activists’ hedge funds has been much higher than the returns of an average hedge fund. Furthermore, we believe do-it-yourself investors have an advantage over activist hedge fund investors because they don’t have to pay 2% of their assets and 20% of their gains every year to compensate hedge fund managers. We have found through extensive research that the top small-cap picks of hedge funds are also capable of generating high returns and built a system around this premise. In the 32 months since our small-cap strategy was launched it has returned over 144% and beaten the S&P 500 ETF (SPY) by more than 84 percentage points (read more details). Soon, we’ll be releasing a new quarterly newsletter written by former activist hedge fund analyst Michael Bland that tracks ten or so activist campaigns at any given time.

Carl Icahn
Carl Icahn
Icahn Capital LP

Icahn, the legendary corporate raider, recently decided to return $1.76 billion back to investors. However he is not leaving the investment world, as he plans to invest his own money. The market value of his fund’s public equity portfolio stood at $32.05 billion at the end of March. 13D on the other hand is a much smaller player, with about $375 million worth of regulatory assets under management, but it is the fund’s strategy that makes it unique. Founded in 2011, 13D manages one main fund broken into three share classes, which has delivered an average annual return of over 23% since its inception, showcasing the validity of following activist campaigns.

Both Icahn Capital and 13D added Hologic, Inc. (NASDAQ:HOLX) to their portfolios in the last quarter of 2013. The $10.75 billion developer and manufacturer of health care diagnostic testing products, imaging systems and surgical products had shown a profit in only one of the last six years before Icahn took a stake in the company. At the end of its fiscal year 2014, Hologic, Inc. (NASDAQ:HOLX) turned in a total profit of $17.3 million. Icahn’s stake in the company represents 12.16% of the company’s outstanding shares and amounts to 34.15 million shares valued at $1.13 billion, while 13D’s stake comprises 468,800 shares valued at $15.48 million. After Icahn, another prominent activist investor, Ralph V. Whitworth‘s Relational Investors is the largest stockholder of Hologic, Inc. (NASDAQ:HOLX) within our database, owning some 12.97 million shares valued at $428.28 million.

The second company on our list,  Hertz Global Holdings Inc (NYSE:HTZ), caught Icahn’s eye in the third quarter of 2014 as he felt that the company was undervalued and hence took an activist stake in the $9.39 billion car rental business. The company’s stock has slid by more than 26% since then amid accounting issues plaguing it that not even Icahn has been able to overcome thus far. The management of Hertz Global Holdings Inc (NYSE:HTZ) expect to release their first quarter financial results along with the restated ones for the last three years by the middle of this year. The rental & leasing services industry has been showing weakness this year as well, and is down by nearly 2%. Icahn’s stake in Hertz stood at 51.92 million shares valued at $1.13 billion at the end of March, while 13D increased its stake in Hertz Global Holdings Inc (NYSE:HTZ) by 19% during the first quarter to about 529,200 shares valued at $11.45 million. Yet another big activist, Barry Rosenstein‘s JANA Partners, is the second-largest stockholder after Icahn among those that we track, owning some 41.78 million shares of Hertz Global Holdings Inc (NYSE:HTZ) valued at $905.82 million.

Next in line is Gannett Co., Inc. (NYSE:GCI), the activist campaign for which was started by Icahn in the third quarter of 2014. 13D initiated a stake in the company around the same time and after bulking up the stake over the next two quarters, the fund currently holds some 246,600 shares of Gannett Co., Inc. (NYSE:GCI) valued at $9.14 million. Icahn Capital’s holding in the $8.53 billion media and marketing solutions company currently amounts to 14.97 million shares valued at $554.99 million, representing 6.59% of the company’s outstanding stock. The campaign in Gannett Co., Inc. (NYSE:GCI) marks another success for Icahn, as the company’s stock has appreciated by more than 16% since the activist’s intervention. The company’s focus on expanding its digital and broadcasting  footprint while its newspaper industry continues to shrink has borne fruit. In this spirit, Gannett Co., Inc. (NYSE:GCI) is spinning off its publishing segment this  coming Monday.  Aside from Icahn Capital, John W. Rogers‘ Ariel Investments is the largest stockholder of the company in our database, holding about 5.36 million shares valued at $198.90 million.

Kenneth Squire
Kenneth Squire
13D Management

Icahn Capital’s stake in Nuance Communications Inc. (NASDAQ:NUAN) represents almost 19% of the company’s outstanding shares. The holding comprises 60.78 million shares valued at $872.26 million. Although the fund initiated a sizable passive stake in the $5.71 billion provider of voice and language solutions in the first quarter of 2013, the activist campaign started towards the end of the third quarter of that year. The stock is up by 2.02% since then. 13D initiated a stake in Nuance Communications Inc. (NASDAQ:NUAN) during the fourth quarter of 2013 and currently holds about 413,600 shares valued at $5.94 million. Among the funds that we track, Ahmet Okumus‘ Okumus Fund Management is the largest stockholder of Nuance Communications Inc. (NASDAQ:NUAN) after Icahn, owning some 5.11 million shares valued at $73.32 million.

Towards the end of the fourth quarter of 2014, Icahn initiated an activist stake in Chesapeake Energy Corporation (NYSE:CHK). Lower oil prices have put a dent in the energy company’s profitability and its stock is down by about 54% since Icahn added the company to his fund’s portfolio. After a 9% increase in the first quarter, the current holding comprises 73.05 million shares of Chesapeake Energy Corporation (NYSE:CHK) valued at $1.03 billion. 13D on the other hand owns about 374,500 shares valued at $5.3 million. Mason Hawkins‘ Southeastern Asset Management is the second-largest stockholder of Chesapeake Energy Corporation (NYSE:CHK), with 64.20 million shares valued at $909.08 million.

Though he did succeed in pushing it towards a split, another one of Icahn’s campaigns that hasn’t necessarily been a success so far involves Manitowoc Company Inc (NYSE:MTW), in which an activist stake was taken at the end of last year. The $2.67 billion capital goods manufacturer’s stock has depreciated by 11% so far this year. Icahn Capital holds about 10.58 million shares of the company, valued at $228.16 million. The stake represents 7.78% of the company’s outstanding stock. 13D cut its stake in the company by 11% during the first quarter to 358,100 shares valued at $7.72 million. Larry Robbins‘ Glenview Capital holds about 8.61 million shares of Manitowoc Company Inc (NYSE:MTW) valued at $185.72 million.

Disclosure: None

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