Even After Dell Inc. (DELL) Stalemate, Icahn Is Still A Success

On September 9th, billionaire activist investor Carl Icahn, who manages Icahn Capital (find Icahn’s favorite stocks), conceded his battle over Dell Inc. (NASDAQ:DELL) in a letter to the company’s shareholders. Founder Michael Dell and a consortium of financial backers led by private equity fund Silver Lake had successfully delayed a shareholder vote on their proposed buyout of Dell Inc. (NASDAQ:DELL), and changed the rules to allow abstentions rather than count abstentions as “no” votes; these abstentions had looked likely to tip the balance against them in the initial shareholder vote. While Icahn was unsuccessful in pushing for an even higher price for the company, and continues to believe that the deal undervalues Dell Inc. (NASDAQ:DELL), he did manage to agitate for a somewhat higher transaction price.

We have gone through all eleven of Icahn’s original 13D filings since the beginning of September 2011. One of these- in Nuance Communications Inc. (NASDAQ:NUAN)- came late last month and so we’ll mark that as incomplete. Another, CVR Refining, is a subsidiary of another of Icahn’s activist targets CVR Energy, Inc. (NYSE:CVI) and so we will count that as one activist campaign. A third, in Motricity- which has since changed its name to Voltari- is a very small position due to that company’s small size. This leaves Dell Inc. (NASDAQ:DELL) and the following seven activist moves, where we will compare the current stock price to the value the day before the 13D was filed (Dell Inc. (NASDAQ:DELL) is up 4%, a bit above the S&P 500’s return, on this basis):

Navistar International Corp (NYSE:NAV), October 2011. The truck and truck engines company’s stock price dropped in mid 2011 after its new engine turned out short of environmental standards. Icahn pursued a number of strategies for value creation, including merging the company with peer Oshkosh, but as of today the stock is down slightly from the filing date while market indices have risen 40%.

WebMD Health Corp. (NASDAQ:WBMD), October 2011. WebMD is another stock which was declining in mid 2011, and continued to fall after Icahn invested in the company. It fell to lows below $13.50 late last year and even after a strong rise in the stock price since that time has only barely broken even with its levels prior to the filing.

CVR Energy, January 2012. CVR, an oil refiner and producer of fertilizer with a market capitalization of $3.6 billion, is off its highs from earlier this year but is still close to double the price it was trading at before Icahn announced its involvement. The company has partially spun out CVR Refining, an LP, as well.

Chesapeake Energy Corporation (NYSE:CHK), May 2012. A vicious circle drove Chesapeake’s stock price below $16 in May 2012: low natural gas prices following an aggressive buildout of the company’s production; resulting concerns that the company might not be able to generate sufficient cash flow; governance concerns; and worries that the company would have to sell assets at fire-sale prices. Icahn stepped in, CEO Aubrey McClendon was driven out earlier this year, and currently Chesapeake is up 67% since just before the 13D was filed.
Netflix, Inc. (NASDAQ:NFLX), October 2012. Icahn and his team got on the Netflix roller coaster at just the right time, filing a 13D for the company on Halloween 2012. The stock has since more than tripled in price, to nearly $300 per share. This hasn’t been primarily due to Icahn’s activist moves in the stock; rather, markets have become more optimistic about the company’s prospects as it has stabilized its subscriber base, has been recording increases in revenue, and its original programming is proving competitive in quality with many network and premium TV options.
Greenbrier Companies Inc (NYSE:GBX), November 2012. The $650 million market cap provider of freight cars was trading below $14 in early November. Icahn’s intent had been to merge the company with peer American Railcar, which has been another of his holdings. After Greenbrier rejected the offer, Icahn exited the company, though it looks like this was at prices in the $18-19 range. The stock fell following his sales but has since recovered on its own, to about $24.
Herbalife Ltd. (NYSE:HLF), February 2013. Billionaire Bill Ackman of Pershing Square gave a public presentation last December calling the health and weight loss products company a pyramid scheme, arguing that distributors would eventually abandon the company and it might even see domestic operations shut down. The stock price plunged as a result. Icahn challenged Ackman in a highly charged argument on CNBC, and filed a 13D for the company on February 14th. Herbalife is currently up 75% since the filing- and has nearly doubled year to date- as financials continue to improve and there has been no sign of significant regulatory action.

In conclusion, out of these eight buys we have two where Icahn has underperformed the market (Navistar and WebMD), two where he has successfully pushed for change and earned large profits (Chesapeake and CVR), two where he has earned at least a small profit despite modest or no accomplishments from an activist point of view (Dell Inc. (NASDAQ:DELL) and Greenbrier), and two where he has made money even though there has not been much change at the company (Herbalife and Netflix). This demonstrates that, at least recently, Icahn has a very high “slugging percentage” in getting big returns from stocks where he files a 13D, and shows that investors are well served to closely monitor his filings.

Disclosure: I own no shares of any stocks mentioned in this article.