Billionaire Carl Icahn’s Top 10 Picks

In this article we take a look at billionaire Carl Icahn’s top 10 stock picks. You can skip our detailed analysis of Icahn’s performance, his investment philosophy and some interesting points from his past and go to Billionaire Carl Icahn’s top 5 stock picks.

Carl Icahn is an American billionaire and hedge fund manager whose total worth stands at over $15 billion. The 85-year-old’s hedge fund has over $20 billion in managed securities, as of the end of the fourth quarter. Often known as “corporate raider,” Icahn has a reputation for being an activist and aggressive investor often initiating corporate takeovers of companies and picking up fights with famous investors and billionaires.  In 1985, Icahn took over Trans World Airlines and took it private. Icahn then started selling off the airline’s assets and routes to other companies and airlines, increasing TWA’s debt, eventually forcing the company to announce bankruptcy in 1992. Other activist bids and takeover attempts of the billionaire include his unsuccessful $7 billion hostile takeover attempt for 89% of U.S. Steel, buying a huge stake in Genesisintermedia, his threats to launch a proxy fight against Mylan Laboratories and his activism around XO Holding.

Carl Icahn’s Activism

Icahn loves to take his fights with famous investors and Wall Street icons, with a no-holds-barred approach. Famous venture capitalist Marc Andreessen in 2014 resigned from his board position at eBay following his long battle with Icahn over PayPal’s spin-off from the ecommerce company.  Icahn wrote scathing remarks about Andreessen in public letters to eBay’s shareholders. Eventually, Icahn won the battle as eBay board announced to spin off the payments company.

Carl Icahn’s Hedge Fund’s Returns

The legendary investor’s hedge fund posted strong gains in the fourth quarter of 2020 after suffering losses in Q3. Investment funds of Icahn Enterprises L.P. posted a 5.6% return in the fourth quarter, compared to a 0.2% return in the same quarter last year. The fund said that its performance was driven by long equity positions primarily in the energy industry. The gains, however, were offset by losses from its short index and short single name equity positions. Carl Icahn’s investment fund has returned 73% since its inception in November 2004 through the end of 2020. The fund has net short notional exposure of 52% compared to net long of 8% at the end of the third quarter of 2020.

Carl Icahn's top 10 stock picks

Carl Icahn’s Warning about a ‘Painful Correction’

Earlier this year, the billionaire investor gave an interview to CNBC and said:

“In my day I’ve seen a lot of wild rallies with a lot of mispriced stocks, but there is one thing they all have in common. Eventually they hit a wall and go into a major painful correction. Nobody can predict when it all happen, but when that does happen, look out below. Another thing they have in common is it’s always said, ‘it’s different this time’. But it never turns out to be the truth.”

Carl Icahn on Losing Money During COVID-19 Pandemic

In an interview to Bloomberg last year, Carl Icahn mentioned how the pandemic resulted in his fund losing money and talked about some of his investment moves.

“We keep it pretty well hedged but even the hedges couldn’t stop us from losing money, but we still have quite a bit so I’m not crying about it. I’ve always kept a large amount of cash and cash equivalents for stormy days so I think there’s going to be very interesting times ahead. You have to be extremely careful in this market, and I think there’s also some good opportunities.

I think you may see us recovering from the virus… It’s not going to be just ‘let just go out and let’s have fun’. This virus is the most contagious one. Let me give you a comparison, in SARS, 1 person would infect 1.2 people. Here, you would infect 5 people because you infect people even if your asymptomatic.”

Tech Stocks’ Multiples Are not “Justified”

“These technology companies that has these great multiples, I think the real problem there is that, in many of the businesses, its not needed as much as they sell them. We’ve spent over a billion dollars and we really don’t get that much for it. We do need the cloud but I think, all that stuffs, all those software, I mean, the multiples they have, I don’t believe its justified. But that’s just me… My biggest position today is a short sell, and that’s on the CMBX fixtures. I look at risk-reward. I started shorting this in the summer before the virus came on… We started on the summer but we added through it.”

Billionaire Carl Icahn on Shorting Stocks

“We have billions of billions of dollars on the short side. It really is a beautiful trade on a risk-reward basis. You look at risk-reward, that’s where I look at. The risk-reward of this market isn’t the greatest right now. The risk is too high for the reward in many many companies, but here, I never seen anything with a risk-reward so bad because here you could risk. And you would take the lessons to be learned and you shouldn’t be pushing this stuff. You can lose really all your money. I mean now, I don’t think that investors are going to lose all their money.. but you can lose 80% of it or 70% of it, and indeed, you already lost about 30% or 40%, and people don’t realize it. They go out and tell, ‘oh you’re getting 6%, 7% comparing to treasury because you bought an investment grade… They’re pushing that and I really think it’s untouchable. I look for these things. I made all my money in looking for that risk-reward thing.

“You have to have enough capital to will hold against storms. It’s extremely hard, I would say in the oil area, it’s hard unless you play that future game to hedge it. But we do hedge sometimes against the crack spread… The point I’m trying to make is little bit more different. I’m saying that, where I really learn to make money and see it, I look for something that would hit you over the head, and you say, ‘this is great’. It is hard to find them now. Sometimes you’re going to be wrong. But you do find situations that when you look at the whole thing, the short of DMBX, I mean the risk and reward is ridiculous… So here you got a very limited risk and a great reward.”

Billionaire Carl Icahn's Top 10 Picks

Carl Icahn’s hedge fund struggled in 2020 amid the effects of the coronavirus. The fund has rebounded, but the same is not true for the broader hedge fund industry. Its reputation has been tarnished in the last decade, during which its hedged returns couldn’t keep up with the unhedged returns of the market indices. On the other hand, Insider Monkey’s research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 88 percentage points since March 2017. Between March 2017 and February 5th 2021 our monthly newsletter’s stock picks returned 187.5%, vs. 75.8% for the SPY. Our stock picks outperformed the market by more than 111 percentage points (see the details here). We were also able to identify in advance a select group of hedge fund holdings that significantly underperformed the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 16. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to. You can subscribe to our free newsletter on our homepage to receive our stories in your inbox.

Let’s start our list of Billionaire Carl Icahn’s top 10 picks.

10. Herc Holdings Inc. (NYSE: HRI)

Value: $298,499,000
Percent of Carl Icahn’s 13F Portfolio: 1.48%
Number of Hedge Fund Holders: 15

Herc Holdings Inc. provides construction and industrial equipment for rent. Financial services company Baird in December said in a note that Herc is in a better position to weather the coronavirus-related effects in 2021 as economic activity and construction come back to normal. In the fourth quarter, Herc posted non-GAAP EPS of $1.35, above the Wall Street estimates by $0.32. Revenue in the quarter totaled $520.4 million, beating the estimates by $23.09 million.

As of the end of the fourth quarter, 15 hedge funds in Insider Monkey’s database of 887 funds held stakes in Herc Holdings Inc., compared to 19 funds in the third quarter. Carl Icahn’s Icahn Capital is the biggest stakeholder in the company, with 4.5 million shares, worth $298.5 million.

9. Xerox Holdings Corporation (NYSE: XRX)

Value: $667,159,000
Percent of Carl Icahn’s 13F Portfolio: 3.32%
Number of Hedge Fund Holders: 27

Xerox is a workplace automation company that provides printing, AI, automation, security, communications and Internet of Things services. The company announced plans to create three new businesses: software, financing and innovation.  Morgan Stanley recently cut the stock to underweight, citing a shrinking market. The firm said that Xerox’s earnings will come under pressure amid long-term investments. Xerox shares have lost about 5% in value over the last 12 months.

According to our database, the number of XRX’s long hedge funds positions increased at the end of the fourth quarter of 2020. There were 27 hedge funds that hold a position in Xerox Holdings Corp. compared to 28 funds in the third quarter. The biggest stakeholder of the company is Icahn Capital, with 27.8 million shares, worth $667.2 million.

8. Cloudera, Inc. (NYSE: CLDR)

Value: $727,874,000
Percent of Carl Icahn’s 13F Portfolio: 3.62%
Number of Hedge Fund Holders: 29

Cloudera ranks 8th on the list of billionaire Carl Icahn’s top 10 stock picks. The company offers various products, including Cloudera Enterprise Data Hub, Cloudera Analytic BD, Cloudera Operational DB, Cloudera Data Science & Engineering, and Cloud Essentials. In 2020, the company’s revenue came in at about $794 million, compared to $480 million in 2019. The company recently entered into a $500M senior secured credit agreement, which also includes share buybacks. Cloudera shares have gained about 100% over the last 12 months.

With a $727.9 million stake in Cloudera Inc., Carl Icahn’s Icahn Capital owns 52.3 million shares of the company as of the end of the fourth quarter of 2020. Our database shows that 29 hedge funds held stakes in Cloudera as of the end of the fourth quarter, versus 31 funds in the third quarter.

7. Navistar International Corporation (NYSE: NAV)

Value: $735,449,000
Percent of Carl Icahn’s 13F Portfolio: 3.66%
Number of Hedge Fund Holders: 29

Illinois-based Navistar ranks 7th on the list of Billionaire Carl Icahn top 10 stock picks. The company manufactures trucks, buses and military vehicles. The stock has gained about 45% in value over the last 12 months. The company recently said it acquired a new property to build electric trucks. The company also plans to start selling low-emission hydrogen-powered heavy trucks as part of its partnership with General Motors and OneH2.

As of the end of the fourth quarter, there were 29 hedge funds in Insider Monkey’s database that held stakes in Navistar International, compared to 43 funds in the third quarter. Icahn Capital, with 16.7 million shares of NAV, is the biggest stakeholder in the company.

6. Newell Brands Inc. (NASDAQ: NWL)

Value: $927,849,000
Percent of Carl Icahn’s 13F Portfolio: 4.62%
Number of Hedge Fund Holders: 23

Carl Icahn is bullish on Newell Brands, one of the biggest consumer products company which owns household storage products brand Rubbermaid. In the fourth quarter of 2020, the company posted adjusted EPS of $0.56, beating the Street estimates by $0.08. Revenue in the quarter jumped 3.1% to $2.7 billion, beating the Street’s forecast by $70 million. Newell stock is up 80% over the last 12 months.

As of the end of the fourth quarter, 23 hedge funds in Insider Monkey’s database of 887 funds held stakes in Newell Brands, compared to 27 funds in the third quarter. Icahn Capital is the biggest stakeholder in the company, with 43.7 million shares, worth $927.8 million.

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Disclosure: None. Billionaire Carl Icahn’s Top 10 Picks is originally published on Insider Monkey.