In this article, we will be taking a look at the top 6 long-term stocks to buy according to billionaire Carl Icahn. To skip our detailed analysis of these stocks and Icahn’s investment insights, you can go directly to see the Top 3 Long-Term Stocks to Buy According to Billionaire Carl Icahn.
This February, in an interview with Bloomberg Markets and Finance, billionaire Carl Icahn of Icahn Capital LP went over a broad range of topics including Fed policy and activist investing. Icahn’s prediction dating back to a few months before the interview revolved around the Fed stimulus metastasizing into inflation, to the dismay of policymakers and investors alike.
Icahn clarified in the interview that he is not predicting an incoming bear market, but rather he is looking at facts to determine whether the current market situation looks negative for investors. In such scenarios, Icahn’s investing policy revolves around activism and going into companies whose stocks are selling cheap. Icahn’s goal is to go in and help such companies, as he believes many of their CEOs are failing to do an adequate job in running them. His main priority in these cases is to uncover the hidden jewels in the economy, invest in companies he finds value in, and fix their management issues to bring their share price back up.
While Icahn’s approach may seem similar to another Wall Street giant, Warren Buffett, just this March Icahn offered comments to CNBC to explain the difference in his investment style, compared to Buffett’s. The divergence from Buffett’s investment strategy became clearer when the two investors’ different approaches to shares of Occidental Petroleum Corporation (NYSE:OXY) came to light. Icahn continues to hold positions in several energy companies, while avoiding more renowned names like Exxon Mobil Corporation (NYSE:XOM), Chevron Corporation (NYSE:CVX), and NextEra Energy, Inc. (NYSE:NEE).
While Buffett had been building up his position in Occidental, increasing his stake in the billions, Icahn was selling his long equity position in Occidental to exit the company. Buffett’s approach underlined his patience and extended time horizon, while Icahn does not focus on constructing a portfolio to be maintained in the long term. Even though Icahn made nearly $2 billion in the Occidental Petroleum Corporation (NYSE:OXY) stock since he began buying shares in the company in 2019, his recent departure from the company’s shareholders may signify that he considers his job there to be done. For Icahn, a company that is undervalued and could use his help in performing better is more worth his time and energy, and perhaps Occidental does not need the same degree of help anymore.
Being a renowned activist investor, Icahn has also spoken out against the hypocrisy of Wall Street’s Environmental, Social, and Governance (ESG) efforts. This April, a Wall Street Journal article mentioned how Icahn expressed that firms today are merely trying to profit off of ESG efforts without actual concern for the societal impacts on their practices. The ESG industry has been performing extremely well in recent times, with its global market adding up to about $40 trillion in assets, as of this April. Despite this, Icahn is dismayed by the practices of several big conglomerates such are McDonald’s Corporation (NYSE:MCD) and The Kroger Co. (NYSE:KR). He has since proposed adding new directors to the boards of both companies, in light of their dismal mistreatment of pigs in their supply chains.
Icahn continues to hold faith in his activist investment strategies. A Bloomberg article from last year mentioned that his fund’s losses in 2019 and 2020 had nothing to do with its activism. Rather, he believes being too hedged caused the disappointing results. Regardless, by reducing the firm’s short hedges, its indicative net asset value increased by about $668 million in the first quarter of 2021.
We can now take a look at the top 6 long-term stocks to buy according to billionaire Carl Icahn.
Our Methodology
We have selected those stocks from Icahn’s latest 13F holdings that he has held for the past five years or more. They are ranked based on Icahn’s stake in them, from the lowest to the highest.
Top Long-Term Stocks to Buy According to Billionaire Carl Icahn
6. SandRidge Energy, Inc. (NYSE:SD)
Icahn Capital LP’s Stake Value: $75,511,000
Percentage of Icahn Capital LP’s 13F Portfolio: 0.36%
Number of Hedge Fund Holders: 19
SandRidge Energy, Inc. (NYSE:SD) is an oil and gas exploration and production company, operating primarily in the US Mid-Continent. The company had an interest in 817 net producing wells and operated about 368,000 net leasehold acres in Oklahoma and Kansas, as of December 2021. It also holds about 71.3 million barrels of oil equivalent in proved reserves.
This August, SandRidge Energy, Inc. (NYSE:SD) issued a press release stating its second quarter EPS was $1.32, while its revenue of $69.76 million was up 104% year over year. The company also updated its 2022 operational and capital expenditure guidance to now account for three additional wells in its drilling and completion program, alongside an expanded well reactivation activity. The company’s working capital growth stands at 51.3% year over year, while its operating cash flow growth rate is 179.3% year over year.
There were 19 hedge funds long SandRidge Energy, Inc. (NYSE:SD) in the second quarter, with a total stake value of $160.9 million. Of these hedge funds, Icahn Capital LP was the largest stakeholder in the company, holding 4.8 million shares worth about $75.5 million.
SandRidge Energy, Inc. (NYSE:SD), like Exxon Mobil Corporation (NYSE:XOM), Chevron Corporation (NYSE:CVX), and NextEra Energy, Inc. (NYSE:NEE) is an energy company many successful investors are eyeing this year.
5. Conduent Incorporated (NYSE:CNDT)
Icahn Capital LP’s Stake Value: $164,805,000
Percentage of Icahn Capital LP’s 13F Portfolio: 0.79%
Number of Hedge Fund Holders: 22
Conduent Incorporated (NYSE:CNDT) is an information technology company offering business process services in the US, Europe, and internationally. The company operates through its Commercial Industries, Government Services, and Transportation segments. It is based in Florham Park, New Jersey.
This April, Conduent Incorporated (NYSE:CNDT) announced that the firm is attempting a separation of its transportation business by either selling or spinning it off. The announcement resulted in the stock gaining 13.8%. The company noted that this move will benefit its commercial, government, and transportation businesses as it will enable more focused operating models and capital allocation priorities to be achieved.
Conduent Incorporated (NYSE:CNDT) was found among the 13F holdings of 22 hedge funds in the second quarter, while in the previous quarter, it was found in the portfolios of 30 hedge funds. Their total stake values were $227.6 million and $290.3 million, respectively.
Curreen Capital, an investment management firm, mentioned Conduent Incorporated (NYSE:CNDT) in its first quarter 2022 investor letter. Here’s what the firm said:
“We sold Conduent in the quarter, after each business reported disappointing results. When businesses perform worse than expected, there are always a lot of mitigating factors, or “buts”. But the business is great. But this dynamic management team is doing the right things for long-term growth. But the price is down, surely it’s cheap here. And of course there are more emotional buts… But I have told people that this business is great. But what if I sell at the bottom? But I am a long term investor. But, but, but… ‘Cut the weeds and water the flowers’ introduces clarity, almost a ruthless clarity, that tips the scales away from the “buts”. In the long run—though not in every case—cutting the weeds and watering the flowers improves both my thinking and our results. Our Weeds: Conduent. At Conduent, results were weak and suggest that the company’s turnaround has stalled. My hypothesis had been that Conduent’s turnaround would continue, driving higher earnings and ultimately a higher stock price. I like the management, the valuation was inexpensive, and the company’s return to its strategy of selling off business segments may generate value for shareholders. But we owned Conduent because it was turning around, and with that stalled, I did not want to own the business. We sold our shares at $4.247.”
4. Herc Holdings Inc. (NYSE:HRI)
Icahn Capital LP’s Stake Value: $362,659,000
Percentage of Icahn Capital LP’s 13F Portfolio: 1.73%
Number of Hedge Fund Holders: 24
Herc Holdings Inc. (NYSE:HRI) is an industrials company, operating as an equipment rental supplier through its subsidiaries. The company operates in the US and internationally. It rents aerial, earthmoving, material handling, and compaction equipment, among more.
On August 22, Ken Newman at KeyBanc reiterated an Overweight rating on Herc Holdings Inc. (NYSE:HRI). The analyst also raised his price target on the stock from $130 to $165.
Newman commented that Herc Holdings Inc. (NYSE:HRI) is set to benefit from more resilient earnings outlooks in 2022 and 2023. This is based on the fact that the company has improved its non-residential construction trends. Newman has thus decided to increase estimates and raise price targets on the stock. Over the next three to five years, Herc Holdings Inc.’s (NYSE:HRI) EPS is also expected to grow by 26.3%.
Our hedge fund data shows 24 funds long Herc Holdings Inc. (NYSE:HRI) in the second quarter, compared to 25 hedge funds in the previous quarter. Their total stake values were $761 million and $1.4 billion, respectively.
Alger Capital, an investment management company, mentioned Herc Holdings Inc. (NYSE:HRI) in its second quarter 2022 investor letter. Here’s what the firm said:
“Herc Holdings Inc. (NYSE:HRI) is one of North America’s largest equipment rental companies with products for construction, moving materials and other functions. We believe the company has strong fundamentals, but its stock underperformed because cyclical equities have gone out of favor with many investors due to the Fed increasing interest rates and investors’ growing fears that a potential recession could hurt construction activity in the U.S. In addition, Herc provided mixed results for its first quarter, including profitability falling below expectations as determined by the consensus of analysts at financial services firms. Nevertheless, the company raised its guidance for the fiscal year.
One of Herc’s s main competitors has indicated that rental demand continues to be very strong. Additionally, we believe a decade of underinvestment in capital improvements could support demand for rental equipment.”
Like Exxon Mobil Corporation (NYSE:XOM), Chevron Corporation (NYSE:CVX), and NextEra Energy, Inc. (NYSE:NEE), Herc Holdings Inc. (NYSE:HRI) is among the top popular stocks elite hedge funds are piling into today.
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Disclosure: None. Top 6 Long-Term Stocks to Buy According to Billionaire Carl Icahn is originally published on Insider Monkey.
