Icahn has a relatively small stake in Transocean but has announced plans to acquire more. Icahn’s battle with the Board for a special dividend still rages as the Board decisively recommends shareholders vote against Icahn’s proposals. Knowing Icahn, he may yet win the war.
Transocean LTD (NYSE:RIG) has a negative EPS of $0.62, but a forward P/E of 8.91. The company was one of those names that conservative companies like Edward Jones liked to recommend. It has given shareholders back over $20 billion in dividends and share repurchases, but since the April 2010 incident has had to keep money in reserve for legal claims. With a PEG at .51 it seems the market isn’t valuing its position in the drilling industry and its investment in the future with new deepwater rigs.
Analysts’ median target is $60.00 and they see 22.31% EPS growth per year over 5 years. However, the stock received two downgrades in February from Howard Weil and Deutsche Bank. Deutsche Bank’s was to a Sell.
Just buy Icahn Enterprises instead?
As a master limited partnership engaged in investment, gaming, food packaging, home fashions, railcars, auto manufacturing, metals, energy, and real estate Icahn Enterprises is certainly diversified. But if you buy Icahn Enterprises you are not just piggybacking on one or two stocks you are along for the ride with Carl himself holding 90.50% of the controls.
The stock is up 28.57% over 52 weeks. The company is not itself involved with the Ackman/Icahn vendetta over Herbalife Ltd. (NYSE:HLF). That’s Carl being Carl. Most of the company’s holdings are Buffett worthy but Icahn Enterprises does have a $2 billion position in Dell which may soon pay off for Icahn Enterprises.
One thing about piggybacking with Icahn is you will never be bored but you may have to spend more time on due diligence than with Berkshire Hathaway to keep up with Icahn’s deals.
Take a ride on the wild side
One thing about piggybacking with Icahn is you will never be bored but you may have to spend more time on due diligence than with Berkshire Hathaway to keep up with all Icahn’s deals.
I think you could quite safely piggyback on American Railcar with its higher yield and lower PEG than its rivals. Transocean LTD (NYSE:RIG) could warrant a speculative look see as well but this might take longer to see a return. If you are a true Icahn believer you might as well go with Icahn Enterprises and enjoy that 7% yield. But hold on tight, it could be a wild ride.
The article Is it Worth Piggybacking the Iconic Carl Icahn? originally appeared on Fool.com and is written by AnnaLisa Kraft.
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