Carl Icahn, a billionaire activist investor, has been making moves in his portfolio. Thanks to a recent 13F filing, we've learned that Icahn recently added to his stakes in Icahn Enterprises (NASDAQ:IEP), Herbalife (NYSE:HLF), and Navistar (NYSE:NAV). He also added a new company to his holdings, Conduent (NASDAQ:CNDT). Here's why these four companies may have earned his attention in the first quarter.
Icahn bets on himself
The famed investor has recently been his own biggest backer, snapping up shares of Icahn Enterprises, LP, basically a publicly traded hedge fund managed by Icahn himself. Icahn snapped up about 10.5 million shares of stock last quarter, increasing his ownership to about 140.5 million shares.
During the quarter, a rights offering by Icahn Enterprises enabled its investors to acquire 0.07718 units for every unit they owned at a price of $53.71 per share. The price was a discount to the $58 market price at which the stock closed on Feb. 9, when the rights were distributed to shareholders.
Icahn took full advantage of the below-market price to snap up more units of his eponymous limited partnership. The offering helped the levered partnership improve its financial standing, injecting more cash into the company just as it refinanced a slug of its outstanding debt maturities.
It's honestly hard to tell whether Icahn likes Herbalife or that he simply hates the man on the other side of the trade, Bill Ackman. Ackman famously made a billion-dollar bet against Herbalife by shorting the company's stock and purchasing long-dated put options.
Icahn has been a continuous thorn in Ackman's side, snapping up shares of Herbalife, often followed with public pronouncements of his buying activity and his love for the stock.
Icahn once called the trade the "mother of all short squeezes." By buying up the float and making the stock even harder to borrow, Ackman's short becomes more costly. It also makes it that much harder for Ackman to get out of his short position at a time when other positions -- namely, Valeant -- have battered his hedge funds' portfolios. (Herbalife's massive share repurchases are certainly helping Icahn's squeeze, too.)
Icahn's purchases this quarter were relatively small, increasing his position by only about 1%, but it marks the third consecutive quarter in which Icahn has added to his position in Herbalife.
Betting on trucking
Navistar has been in Icahn's portfolio since 2011, but there may be light at the end of the activism tunnel for Icahn and his affiliates, who paid significantly more for their shares than where Navistar currently trades.
Last year, Volkswagen AG purchased a 16.6% stake in the company, which it pledged to hold for at least three years. The automaker has been a rumored acquirer of Navistar for a long time, and the duo became more aligned when Volkswagen secured two director positions on Navistar's board and reached an agreement to share technology and part sourcing.
Icahn increased his stake by roughly 2% this quarter, an interesting development after a long drought of activity.
Holding on to an activist trophy
Conduent is a new position in Icahn's portfolio, which the investor acquired when it was spun off from Xerox in December 2016. Icahn first purchased shares of Xerox in the fourth quarter of 2015, and rapidly pushed for the company to improve shareholder value by splitting its vast business units.
By the end of January 2016, Icahn took to Twitter to announce his success, touting the benefits that would come from separating Xerox and Conduent. By the end of the year, shareholders of Xerox received one Conduent share for every one Xerox share they owned. So far, Icahn's campaign has been only modestly profitable.
Icahn's first purchased Xerox shares at an average of $10.12 per share, and the two companies are now valued at approximately $10.63 per original Xerox share. Of course, Icahn may believe there is further upside as the market works to value the pieces separately, given he let his bet ride for yet another quarter after the spinoff was completed last December.
What we don't know
Icahn is as much of a trader as he is an investor. Following Trump's presidential victory and a rapid decline in futures prices during overnight trading, he reportedly left a victory party to "play the market." Some reports suggest he made as much as $1 billion during that trading session.
Regulatory filings are inherently dated, as they only show what Icahn owned at the end of each quarter, not what he has bought or sold since. For this reason, picking over 13F filings of legendary investors isn't a guaranteed way to find winners, but it can be a good way to get introduced to stocks you might not otherwise explore.