Carl Icahn’s Icahn Capital LP has disclosed a new move with the Securities and Exchange Commission involving Chesapeake Energy Corporation (NYSE:CHK), in which the famed investor has increased his activist position to 73.05 million shares, which amounts to 10.98% of the company’s common stock. That’s an increase of 6.60 million shares to his position held at the end of 2014, with the purchase of new additional shares taking place on March 11 at a price per share of $14.15. In addition to Chesapeake Energy, we’ll take a look at two of Icahn’s other top energy plays, CVR Energy, Inc. (NYSE:CVI) and Talisman Energy Inc. (USA) (NYSE:TLM). Icahn’s significant exposure to energy took a hit at the firm’s earnings last year. Icahn’s publicly-traded investment vehicle, Icahn Enterprises LP (NASDAQ:IEP) posted a loss of $225 million for 2014, versus a net profit of $1.0 billion a year earlier. It was the first time that the company posted a loss since the financial crisis of 2008.
Icahn first disclosed an activist position in Chesapeake Energy Corporation (NYSE:CHK) late in 2010, with ownership of 38.63 million shares, which amounted to a 5.80% stake at the time. Shares peaked at more than $35 in early 2011, a more than 50% hike from when Icahn’s position was disclosed. However his attempts for board representation were rebuffed, as were his pleas to slow the company’s purchases and sell assets. Frustrated, he eventually sold his stake in the middle of 2011.
However in early 2012 he came back to the stock again and built another large activist position, and took another shot at reforming the company’s board. This time Icahn was successful at not only remaking the board, but in eventually ousting Founder and CEO Aubrey McClendon in early 2013. The stock enjoyed a strong run from that point until the middle of 2014, again gaining more than 50% during that timeframe. However, plummeting oil prices have wreaked havoc on the stock since, sending it plunging back down more than 50%, and prompting Icahn’s latest top up.
The most recent dip occurred on February 25 following disappointing earnings results in which the Oklahoma City-based oil and natural gas company actually topped revenue estimates with its $5.05 billion in revenue outdoing the $4.83 billion estimates, yet still fell short of earnings estimates with its earnings per share of $0.11 falling $0.13 short of estimates. Shares fell from just under $20 before the earnings release, to less than $14 two weeks later. Despite his large positions, Icahn was not the largest shareholder among funds we track, that distinction went to fellow billionaire Mason Hawkins, whose fund Southeastern Asset Management held 73.87 million shares at the end of 2014, up 18% during the fourth quarter.
Nor was Chesapeake Energy Corporation (NYSE:CHK) Icahn’s top energy pick heading into 2015; that honor belonged to CVR Energy, Inc. (NYSE:CVI), which was not only one of Icahn’s top overall picks, but also his top pick among stocks with a relatively small cap. That makes the stock quite significant given the success of our small-cap strategy, which is based on the top small-cap stock picks of world-class investors, and has returned 132.0% since we first launched our newsletter at the end of August 2012 (through March 11, 2015).
Icahn holds a 71.20 million share stake in CVR Energy, Inc. (NYSE:CVI) as of the end of 2014, which accounts for a whopping 80% of the company’s common shares and gives the activist full control of the board. It also puts him close to a position where he could merge CVR with another one of his energy holdings, should he build at least a 90% stake. Icahn’s position has remained unchanged dating all the way back to the middle of 2012, and was valued at $2.76 billion at the end of the year. Naturally, given Icahn’s large ownership position, the next largest position among the funds we track is quite small. It is held by Joel Greenblatt’s Gotham Asset Management, which initiated a new position of 271,100 shares during the last three months of 2014.
Shares of CVR Energy are up in value by more than 50% since the middle of 2012, and weathered the recent oil price plunge admirably, dipping only 13.56% since the middle of 2014 while much of the rest of the energy sector got battered. Part of that can be attributed to the solid dividend yield of 4.79%, one of the best in the industry. Forbes reported in the middle of January that shares of CVR Energy, Inc. (NYSE:CVI) had entered ‘oversold’ territory, a technical indicator that estimated that selling of the stock would soon wither, with an expressed rebound in the price of shares from there. Shares are up by more than $8, or nearly 25%, since then.
Icahn’s third energy pick (Chesapeake was the second-most valuable) was in Talisman Energy Inc. (USA) (NYSE:TLM), a Canadian upstream oil and gas company which agreed to be purchased by Repsol in the middle of December for $8.3 billion. That purchase helped Icahn recoup some of his losses on the stock, which he first disclosed an activist position on in October 2013. The stock had fallen by over 70% since then in the days leading up to the merger announcement, at which point it more than doubled . Icahn held 76.06 million shares of Talisman Energy Inc. (USA) (NYSE:TLM) at the end of 2014, worth $595.55 million. The position was unchanged throughout 2014. John Paulson’s Paulson & Co opened a large new position of 70.0 million shares of Talisman during the fourth quarter, making it the second-largest shareholder at the end of 2014, among the funds we track.