Every quarter, many money managers have to disclose what they've bought and sold, via "13F" filings. Their latest moves can shine a bright light on smart stock picks.
Today let's look at investing giant Carl Icahn, who has made billions, partly by taking large positions in companies and then pushing for change. These companies have included Texaco, RJR Nabisco, and ImClone Systems. He's also drawn to companies in or near bankruptcy, wanting to make them more valuable in order to sell them at a higher price.
Icahn Associates' reportable stock portfolio totaled $24.6 billion in value as of Sept. 30, 2013. Its top three holdings, Icahn Enterprises, CVR Energy, and Federal-Mogul make up 53% of the overall portfolio's value. Icahn also owns CVR Refining (NYSE:CVRR), a limited partnership formed by CVR Energy in 2012. It recently saw shares drop by double digits after posting disappointing quarterly results, with revenue down 18% and earnings down 73%. (Refiners have been struggling with rising oil prices, falling gas prices, and shrinking margins.)
Another high-profile Icahn holding (recently the portfolio's eighth-largest) is Herbalife (NYSE:HLF), which has been the subject of great controversy among hedge-fund giants, with Bill Ackman calling it a pyramid scheme. Bill Stiritz, CEO of cereal giant Post Holdings, became the company's fourth-largest shareholder a few months ago. Herbalife has been thwarting nonbelievers, recently posting revenue up 19%, earnings up 44%, and volume up 13%, among other solid numbers. Indeed, Herbalife has now outpaced analyst estimates for 19 quarters in a row.
So what does Icahn Associates' latest quarterly 13F filing tell us? Here are a few interesting details.
New holdings are Apple and Talisman Energy. Among holdings in which Icahn Associates increased its stake were Nuance Communications (NASDAQ:NUAN) and Chesapeake Energy. Nuance Communications is a major developer of speech-recognition software, with its technology housed in many iDevices (think "Siri"). It has been seen as a buyout candidate. With Icahn having gobbled up many shares, the company has swallowed a "poison pill," limiting takeover possibilities, and also added two new Icahn-approved board members. There has been speculation that Icahn might push for Apple to buy Nuance, but he has said he wouldn't. While some see Nuance Communications as undervalued now, others are walking away, not liking its recent performance or its CEO's compensation package. The company's future is somewhat uncertain.
Icahn Associates' closed positions included Dell, Hain Celestial Group, and WebMD Health.
Other sizable holdings include Transocean (NYSE:RIG) and Take-Two Interactive (NASDAQ:TTWO). Transocean, an offshore drilling rig owner and specialist in ultra-deepwater drilling, has been selling off some assets and focusing on difficult drilling challenges, which offer greater profitability. It has recently been charging high dayrates, boosting its top line, and signing lucrative contracts, such as a $1.1 billion deal with Chevron. Transocean's order backlog has topped $27 billion, and it offers a hefty 4.1% dividend yield, too. Icahn has successfully pushed the company to boost its dividend and spin off some of its legacy fleet into a master limited partnership. It still carries a lot of debt, though.
Take-Two Interactive is known to many for its successful Grand Theft Auto franchise, which is still delivering via Grand Theft Auto V -- a whopping 29 million units were sold in the game's first month on the market. My colleague Tim Beyers sees the stock as an attractive proposition at recent levels, but others are wary due to the company's inconsistent sales growth. In its last quarter, management boosted projections for 2013 by 22%.
We should never blindly copy any investor's moves, no matter how talented the investor. But it can be useful to keep an eye on what smart folks are doing. 13F forms can be great places to find intriguing candidates for our portfolios.