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Icahn Capital Recovering from Last Year’s Setback as it Pushes Towards Green Territory in 2016

Famous activist investor Carl Icahn of Icahn Capital LP suffered some large losses last year due to his fund’s heavy bets on energy and commodities, as it ended the year down by over 18%. The start of 2016 was also gloomy for the fund, with several of its holding plummeting heavily amid a decline in the broader market. However, the rally in oil and commodity prices in the past few weeks seems to be helping the fund regain some of the lost ground. Insider Monkey’s analysis of Icahn Capital LP’s 13F holdings in companies worth at least $1 billion shows that the 19 long positions held by the fund delivered a weighted average loss of only 0.8% during the first three months of the year. In this article, we are going to take a look at the fund’s top five equity holdings going into 2016 and analyze how each one of them performed individually during the first quarter.

We track prominent investors and hedge funds because our research has shown that historically their stock picks delivered superior risk-adjusted returns. This is especially true in the small-cap space. The 15 most popular small-cap stocks among a select group of investors delivered a monthly alpha of 80 basis points between 1999 and 2012 (see the details here).

Carl Icahn
Carl Icahn
Icahn Capital LP

#5 Paypal Holdings Inc (NASDAQ:PYPL)

 – Shares Owned by Icahn Capital LP (as of December 31): 46.27 million

 – Value of Holding (as of December 31): $1.67 billion

Unlike most other stocks, Paypal Holdings Inc (NASDAQ:PYPL) recouped the losses it suffered at the beginning of the year before January closed, after the company reported its fourth quarter financial numbers. However, the trade-off was that it didn’t rally much when the overall market started its rally in mid-February, as PayPal ended the first quarter with gains of 6.6%. On March 23, Paypal Holdings Inc’s stock suffered a large decline after Re/Code published a report revealing that Apple Inc. (NASDAQ:AAPL) will be expanding the presence of its payment platform Apple Pay to mobile sites by the end of this year. A day after this report was published, Piper Jaffray’s famous tech analyst Gene Munster released a note in which he reiterated his ‘Underweight’ rating and $33 price target on Paypal Holdings Inc. In his note, Mr. Munster also highlighted that Paypal could lose a lot of its transaction volume in the coming years, since almost 20% of the company’s total payment volume in 2015 was conducted on an iOS device. While Icahn Capital LP didn’t make any changes to its stake in Paypal Holdings Inc (NASDAQ:PYPL) during the fourth quarter, the family office of another legendary investor, George Soros, brought its holding in the company down by 34% to nearly 3.00 million shares during that period.

#4 American International Group Inc (NYSE:AIG)

 – Shares Owned by Icahn Capital LP (as of December 31): 42.24 million

 – Value of Holding (as of December 31): $2.62 billion

Icahn Capital increased its stake in American International Group Inc (NYSE:AIG) by greater than 30-fold in the fourth quarter and immediately launched an activist campaign on the company. For the last several months, Mr. Icahn and billionaire John Paulson have been persuading American International Group Inc (NYSE:AIG) to split up its business into three publicly-traded, independent companies. Mr. Paulson’s hedge fund Paulson & Co is also a large shareholder of American International Group, holding 11.6 million shares of the company at the end of December. While American International Group Inc (NYSE:AIG) hasn’t accepted the primary demand of these activist investors as of the present time, on February 11 it did reach an agreement with them, agreeing to expand the size of its Board to 16 from 14 members and giving Board seats to Mr. Paulson and Samuel Merksamer, who serves as a managing director at Icahn Capital. On March 30, AIG also accepted Mr. Icahn’s demand to abandon the use of CDS spreads as a measure for performance. However, this truce between American International Group and the activist investors doesn’t seem to have had a positive impact on the stock yet. Like most other banking stocks, AIG shares also ended the first quarter down by double digits at 12.2%.

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Carl Icahn’s top three holdings are sized up on the next page.

#3 CVR Energy, Inc. (NYSE:CVI)

 – Shares Owned by Icahn Capital LP (as of December 31): 71.2 million

 – Value of Holding (as of December 31): $2.8 billion

Icahn Capital initiated a stake in CVR Energy, Inc. (NYSE:CVI) during the final quarter of 2011 and in February 2012 made a bid for the company by offering $30 per share for it. Looking back, it seems the fund was fortunate that the bid failed, since CVR Energy, Inc. (NYSE:CVI)’s stock fell by 32.2% during the first quarter of this year and currently trades at $24.50. Jim Simons‘ Renaissance Technologies, which increased its stake in CVR Energy by 353% to 285,000 shares during the fourth quarter, is another fund that has burned its fingers by investing in the company. Despite the slump in its stock, CVR Energy hasn’t yet suspended its dividend, with the $0.50 quarterly payment translating into an attractive annual dividend yield of over 8% currently. For the first quarter, analysts project the company to report a loss of $0.35 per share on revenue of $736.88 million. For the same quarter of the previous year, the company declared EPS of $0.63 on revenue of $1.39 billion.

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#2 Apple Inc. (NASDAQ:AAPL)

 – Shares Owned by Icahn Capital LP (as of December 31): 45.76 million

 – Value of Holding (as of December 31): $4.8 billion

Icahn Capital had boosted its stake in Apple Inc. (NASDAQ:AAPL) by 600% to 52.76 million shares during the second quarter of 2014 and kept that position intact until the third quarter of 2015. Though the fund reduced its stake in the company by 14% during the fourth quarter, it was still the largest shareholder of Apple Inc. (NASDAQ:AAPL) at the end of December among the funds covered by us. Billionaire David Einhorn’s Greenlight Capital also reduced its stake in the company, by 45% to 6.28 million shares, during the same period. Owing largely to the 12.3% rally they saw during March, shares of Apple managed to end the first quarter up by 4.1%. The company recently launched a new 4-inch smartphone, the iPhone SE, targeted at users in emerging countries at an attractive price point of $399. Though it’s still early to gauge the sales performance of the iPhone SE, according to some analysts the phone is not doing as well as Apple expected it to. Nevertheless, Apple’s stock has continued its positive momentum due to an improvement in analysts’ outlook for its fiscal second quarter and the focus of investors shifting from the Phone 6s to the upcoming iPhone 7.

#1 Icahn Enterprises LP (NASDAQ:IEP)

 – Shares Owned by Icahn Capital LP (as of December 31): 117.03 million

 – Value of Holding (as of December 31): $7.17 billion

Shares of Mr. Icahn’s publicly-traded investment holding company Icahn Enterprises LP (NASDAQ:IEP) made their 52-week low of $42.50 in February, but have appreciated by nearly 44% since then. This is a testament to the point we made at the beginning of this article, that the fund is witnessing a revival in its fortunes. During the fourth quarter, Icahn Capital increased its stake in its founder’s holding company by 3%. On the other hand, another large shareholder of Icahn Enterprises LP (NASDAQ:IEP), Murray Stahl‘s Horizon Asset Management, trimmed its holding in the company by 5% to 3.6 million shares. On February 29, Icahn Enterprises LP made an offer to acquire the outstanding shares of Federal-Mogul Holdings Corp (NASDAQ:FDML) for $7 per share. According to the company’s latest submitted regulatory filing, it already owns 82% of Federal-Mogul Holdings Corp (NASDAQ:FDML). However for the deal to be completed, it will need to be approved by a special committee of Federal-Mogul Holdings Corp’s independent directors and by a majority of stockholders who are not affiliated with Icahn Enterprises LP.

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Disclosure: None