Icahn Enterprises LP (IEP) vs Berkshire Hathaway Inc. (BRK.B)?

Other Moves

Icahn’s questionable financial situation is not stopping it from making other bold moves. The company recently expanded its stake in Netflix (NFLX) and raised $200 million in a secondary stock offering that temporarily crashed its shares. Given its cash flow issues, the offering was probably necessary. Fortunately, it does not seem to have affected investors’ perceptions of the stock. If key investments like Netflix continue to pan out, those who sold out of the stock prior to the secondary offering and failed to buy back in might come to regret their decisions.

Worth a Nibble?

Now that Icahn Enterprises LP (NASDAQ:IEP) has recovered much of the ground that it lost in the wake of its secondary offering, investors would be forgiven for thinking twice about making a move. Given its cash flow issues, it is not certain that Icahn will be able to carry on without further infusions of capital. In this light, it might be far-fetched for its long-term shareholders to expect dividend increases and other capital-return moves in the near future.

However the Dell deal does have the potential to change the conversation. If Icahn is able to increase its stake without angering Dell’s board or mount a leveraged buyout of the entire company, it could become a major player in the PC hardware industry. Moreover, it could use its leverage with Netflix to strengthen ties between the two companies.

Precise speculation is useless at this early stage, but it remains clear that a successful tie-up with Dell would warrant a major revaluation of Icahn. Going forward, yield-seeking investors may be inclined to nibble cautiously at Icahn here. In the event of a pullback, bigger bites might be in order. However, investors who have no need for yield may be better served by tried-and-true Berkshire Hathaway Inc. (NYSE:BRK.B).

The article Icahn Enterprises vs Berkshire Hathaway? originally appeared on Fool.com and is written by Mike Thiessen.

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