In this piece, we will take a look at billionaire Carl Icahn’s top 10 stocks.
One would expect legendary investor Carl Icahn to go slow and cherish his extraordinary and successful career on Wall Street. However, that is not the case as he continues to push to shake up corporate America in pursuit of shareholder value.
At 88 years old, Icahn remains one of the most feared and revered hedge fund managers because he can move the markets as he wishes. While he is often compared to legendary investor Warren Buffett, Icahn deploys a far more aggressive investment strategy beyond value investing.
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The founder of Icahn Enterprises has built a reputation as a “corporate raider” and a ferocious activist investor. Icahn is recognized for his bold investment strategies, where he purchases a share in a company and leverages his power to achieve quick gains in the company’s stock value. This frequently includes participating in proxy battles, issuing public requests, and initiating a takeover campaign.
Likewise, he boasts of one of the most impressive track records on Wall Street, with his investment firm, Icahn Enterprises, having generated an annualized rate of return of about 14% between 2000 and 2022, according to Financhil. In contrast, the S&P 500 enjoyed an average annual return of 6% over the same period, while Buffett’s Berkshire Hathaway recorded an annualized return of about 9%.
Similarly, Icahn has seen an impressive 31% annualized return since 1968. Meanwhile, Buffett achieved a return of 19.5% over a similar timeframe. However, when considering the power of compounding, Buffett’s wealth generated from investment returns is significantly less than that of Icahn. Icahn’s investment prowess has led to a return of $65 for every $1 generated by Buffett.
The high returns that Icahn has succeeded in generating stem from implementing a high-risk, high-reward strategy. Therefore, Billionaire Icahn’s top 10 stocks involve stocks likely to benefit from short-term volatility to generate big gains.
Similarly, Icahn has never avoided cutting his losses when things go wrong. The corporate raider was forced to sell all his equity stakes in one of his holdings when the company filed for bankruptcy in 2020.
Unlike most hedge fund managers, Icahn focuses on an opportunistic investment strategy rather than on specific sectors. In this case, billionaire Icahn’s top 10 stocks are usually spread across various sectors, from technology to healthcare and energy. He also takes a keen interest in companies undergoing restructuring or radical changes.
Icahn has consistently advocated for change within company boards as a corporate raider and activist shareholder throughout his career. However, in recent years, he has experienced a reversal of fortune.
Icahn’s publicly listed firm faced significant scrutiny in 2023 when it was the focus of criticism from short-seller Hindenburg Research, which alleged that the company was overvalued and engaged in a Ponzi-like economic scheme.
In its report, Hindenburg alleged that Icahn has been running a Ponzi-like scheme by taking money from new investors to pay dividends to old investors. The allegations have since escalated, with the US Securities and Exchange saying that the billionaire investor had pledged up to 82% of shares in his companies to secure billions of dollars of margin loans.
“Hindenburg’s modus operandi, which is to publish scurrilous and unsupported allegations, did damage to IEP and its investors. We are glad to put this matter behind us and will continue to focus on operating the business for the benefit of unit holders,” said Icahn, according to CNN.
Icahn and his firm have since agreed to settle the charges for failing to disclose pledges of the company’s securities as collateral in billions of dollars worth of personal loans. Consequently, Icahn and his company will pay $1.5 million and $500,000 in civil penalties to settle the charges.
With this background in mind, let’s delve into billionaire Icahn’s portfolio and his top 10 stock picks.
Carl Icahn of Icahn Capital
Our Methodology
To compile the list of billionaire Icahn’s top 10 stocks, we screened Carl Icahn’s investment portfolio and scanned for his biggest holdings. Next, we ranked the stocks based on the value of the billionaire investor’s stakes in the company, as of Q2 2024. The stocks are ranked in ascending order.
We also mentioned the total number of hedge funds that had bought these stocks per Insider Monkey’s data. Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
Billionaire Carl Icahn’s Top 10 Stocks
10. Caesars Entertainment, Inc. (NASDAQ:CZR)
Icahn Capital LP’s Equity Stake: $96.97 million
Number of Hedge Fund Holders: 54
Caesars Entertainment, Inc. (NASDAQ:CZR) sums up billionaire Icahn’s top 10 stocks as a consumer cyclical investment play. As a gaming and hospitality company, it leases and manages domestic properties, slot machines, video lottery terminals, and e-tables.
Icahn acquired stakes in the casino operator early this year while insisting that he liked the stock and was unprepared to do any activism. It was the second time the billionaire had acquired stakes in the company, having acquired first in 2019 and pushed for its sale as part of activist campaigns.
The investment came as Caesars Entertainment, Inc. (NASDAQ:CZR) implemented numerous important plans to recover and expand the business post-pandemic. A primary emphasis has been extending its online gaming and sports betting systems to capture a larger portion of the growing digital gaming market. This venture is meant to take advantage of the notable expansion in online gaming and provide a fresh income source.
In addition to expanding its online presence, Caesars Entertainment, Inc. (NASDAQ:CZR) has been actively reducing its debt, which became crucial following its 2020 acquisition of Eldorado Resorts. This strategy involves selling assets not central to its operations and restructuring existing debt to enhance the company’s financial health. Achieving better operational adaptability and financial health necessitates these steps.
For its second quarter, the company reported a loss of $0.56 per share. Despite this, its revenues totaled $2.83 billion, falling short of the market’s expectations of $2.86 billion. Its same-store adjusted EBITDA totaled $1 billion, while its Digital adjusted EBITDA totaled $40 million, marking a 263.6% increase compared to the previous year.
The company is still hopeful for the remainder of 2024, buoyed by strong performance in Las Vegas and Caesars Digital, anticipation of the Danville location’s launch, and a $430 million investment in the newly renamed Caesars New Orleans property.
While trading at a trailing price-earnings multiple of 11, Caesars Entertainment, Inc. (NASDAQ:CZR) appears undervalued compared to the average P/E of 15 for stocks in the consumer cyclical sector.
Hedge sentiment was negative toward Caesars Entertainment, Inc. (NASDAQ:CZR) in the second quarter of 2024, as 54 hedge funds held positions in the stock, compared to 57 funds’ positions in the preceding quarter. As of the second quarter of 2024, HG Vora Capital Management is the top shareholder in the company and has a position worth $131.14 million.
Here is what Baron Funds said about Caesars Entertainment, Inc. (NASDAQ:CZR) in its fourth quarter 2023 investor letter:
“In the most recent quarter, we acquired additional shares in Caesars Entertainment, Inc. (NASDAQ:CZR), the largest casino-entertainment company in the U.S. and one of the world’s most diversified casino-entertainment providers. We are big fans of CEO Tom Reeg and remain optimistic about the long-term prospects for the company.
The company operates primarily under the Caesars, Harrah’s, Horseshoe, and Eldorado brand names. The company generates approximately 50% of its cash flow from Las Vegas and 50% from regional destination markets. The company owns approximately half of its real estate and leases the other half from gaming REIT companies – Gaming and Leisure Properties, Inc. and VICI Properties Inc…” (Click here to read the full article)
9. American Electric Power Company, Inc. (NASDAQ:AEP)
Icahn Capital LP’s Equity Stake: $105.75 Million
Number of Hedge Fund Holders: 35
American Electric Power Company, Inc. (NASDAQ:AEP) is a significant power company in the U.S. It ranks among the top electric utilities, delivering power to numerous clients in 11 states. The firm manages various energy production facilities, encompassing coal, natural gas, nuclear, and green energy options.
After acquiring stakes in the U.S. utility company, Icahn engineered an activist campaign that resulted in the ousting of the then-CEO. The company was forced to appoint a new CEO, and the billionaire investor got two seats on the board.
The company delivered solid second-quarter financial results as its investments in modern, affordable, and reliable energy systems continue to benefit customers and communities. American Electric Power Company, Inc. (NASDAQ:AEP) is experiencing record-breaking growth in some regions of our service area, thanks to a robust transmission system and emphasis on economic growth.
Business demand rose by 12.4% compared to the previous year’s second quarter, propelled by a more than 20% increase in our Transmission & Distribution divisions following the launch of new data centers.
Likewise, the company delivered $4.6 billion in revenue in the quarter, up from $4.4 billion delivered last year. Earnings per share rose to $1.25 from $1.13 delivered the same quarter the previous year. American Electric Power Company, Inc.’s (NASDAQ:AEP) strong performance can be linked to its solid first-quarter outcomes, encouraging outlook for the entire year, and increasing need for power from industrial plants and data hubs fueled by artificial intelligence and various other technologies.
While trading at a price-to-earnings multiple of 17, American Electric Power Company, Inc. (NASDAQ:AEP) appears undervalued, given that the average P/E in the utility sector is 21. Additionally, the stock rewards investors with a 3.57% dividend yield.
According to Insider Monkey’s second-quarter database, 35 hedge funds held stakes in American Electric Power Company, Inc. (NASDAQ:AEP), compared to 29 funds in the last quarter. Rajiv Jain’s GQG Partners is a prominent stakeholder of the company, with approximately 9.58 million shares worth $840.75 million.
8. JetBlue Airways Corporation (NASDAQ:JBLU)
Icahn Capital LP’s Equity Stake: $107.96 Million
Number of Hedge Fund Holders: 19
JetBlue Airways Corporation (NASDAQ:JBLU) is one of billionaire Icahn’s top 10 industrial stocks. The company offers air transportation services. Early in the year, Carl Icahn disclosed a 10% stake in the airline giant and initiated an activist campaign to reinvigorate the company’s fortune.
Icahn acquired stakes in the company when it faced growth challenges after federal regulators blocked its plan to acquire Spirit Airlines for $3.8 billion. Nevertheless, the billionaire investor reiterated that the airline was fairly undervalued and represented an attractive investment opportunity.
JetBlue Airways Corporation (NASDAQ:JBLU) has moved to strengthen its growth prospects by upgrading its aircraft fleet with the debut of the Airbus A321neo and the start of transatlantic flights to London. Its achievements are further emphasized by the growth of the Mint service from Newark, which is projected to save $75 million by 2024.
Its dedication to lowering its debt is praiseworthy. The company’s long-term debt-to-equity ratio (a gauge of financial leverage) is 52.2% lower than the industry average, showing a robust financial position.
The airline delivered a $25 million profit in the second quarter, down by 82% year over year. Nevertheless, it was a surprise as analysts expected the company to post a loss. The airline has announced plans to cut costs to rebuild its business and bolster profit margins. It has already announced plans to delay the purchase of $3 billion worth of airplanes as it seeks to generate a gross profit of between $800 million and $900 million.
JetBlue Airways Corporation (NASDAQ:JBLU) remains one of billionaire Icahn’s top 10 stocks as it embarks on a strategy to return to profitability while restoring balance sheet health.
As of Q2 2024, JetBlue Airways Corporation (NASDAQ:JBLU) shares were held by 19 out of 912 hedge funds tracked by Insider Monkey. Its largest shareholder was Carl Icahn’s Icahn Capital LP, which owned 17.73 million shares valued at $107.96 million.