In a recently submitted 13G filing with the SEC, legendary activist investor Carl Icahn‘s Icahn Capital LP revealed that it had increased its activist stake in the liquefied natural gas company Cheniere Energy, Inc. (NYSEMKT:LNG) by 17.2% to 22.68 million shares. The position amasses 9.59% of the company’s outstanding common stock and is valued at more than $1.23 billion at the current price.
Mr. Icahn doesn’t need any introduction, being one of the most successful investors, who began his career as a stockbroker in 1961 and in 1978 started taking controlling stakes in individual companies. In the last almost 40 years, he has lead several companies and their management to change their course of action in order to increase shareholder value. As of June 30, Icahn Capital LP boasts a U.S. equity portfolio of $31.2 billion, with 70% invested nearly equally in stocks from the technology and industrial sectors. Although Icahn Capital held stakes in 24 companies at the end of June, top 10 of its holdings accounted for 91.54% of its equity portfolio.
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Hedge funds and other big money managers like Icahn tend to have the largest amounts of their capital invested in large and mega-cap stocks, because these companies allow for a greater capital allocation. However, our backtests of hedge funds’ equity portfolios between 1999 and 2012 revealed that the 50 most popular stocks among hedge funds underperformed the market by seven basis points per month on average, showing that their most popular picks and the ones that received the bulk of their capital were not actually their best picks. On the other hand, their top small-cap ideas performed considerably better, beating the market by 95 basis points per month. This was confirmed in forward tests of our small-cap strategy since August 2012. The strategy, which involves imitating the 15 most popular small-cap picks among hedge funds has provided gains of 118%, beating the broader market by over 60 percentage points (see more details).