As the ultimate contrarian, the Icahn approach doesn’t quite fall completely in line with the methods of the investing messiah himself, Warren Buffett, which often has people underestimating Icahn, explaining why investors do not piggy-back on his moves as fast as they do Buffett’s. But one part about this tidbit that Icahn does surely enjoy: proving people wrong.
Getting rid of all the fluff, the degrading public letters, the circus egged on by the media, and all the enemies made along the way, Icahn is but a shareholder’s right-hand man, who buys stakes in underperforming companies and suggests strategies to boost a company’s value. He is a value investor at its best.
Out of all the investors GuruFocus reports on, Icahn is surely one that never falls short in excitement.
Out of Icahn’s 16-stock portfolio, valued over $11 billion, there were two stocks that were revealed as Icahn’s stocks with the highest average 10-year EBITDA growth rates.
Forest Laboratories Inc. (NYSE:FRX)
Pharmaceutical company, Forest Laboratories has a 10-Year EBITDA growth rate of 9.5 percent. Its annual EBITDA growth is 7.39 percent.
Icahn’s 11.53 percent stake in Forest Laboratories and his seat in the company’s board was a victory well worth it, since it took a lot of vicious teeth-pulling to get the company’s board to budge. For several months, Icahn did what he did best, push and push to try to overthrow CEO Howard Solomon from his 35-year rein in the company, through a proxy contest.
“I find it ironic that I would have to debate publicly with a man of your age and financial sophistication the need to consider issues of asset diversification and estate planning,” Solomon said in a lengthy letter to Icahn, addressing the Guru’s disparaging claims about Forest Laboratories.
But when Icahn and Forest Labs reached a compromise in August, both parties expressed relief in the resulting decisions:
“We are gratified by the strong support of our shareholders in re-electing nine of our ten directors. The election of only one of Mr. Icahn’s four nominees reflects our shareholders’ continued confidence in Forest’s strategy, corporate governance practices and the strength of our pipeline and portfolio of products. We would also like to welcome our new director, Pierre Legault, who will join the Forest Board after the vote has been certified. We look forward to working with him in a constructive manner to build value for all Forest shareholders over the long term.”
“I am very pleased with the tremendous support that my nominee, Pierre Legault, obtained from shareholders in winning a seat on the Forest Board. Sadly, our proxy system is set up in such a way that the deck is stacked heavily in favor of incumbent management in proxy contests. THIS IS TRUE PARTICULARLY AT FOREST, where a few shareholders with upwards of 25% of the outstanding shares seem to vote in favor of management no matter how bad the company is performing and how bad its corporate governance is. That is why today’s victory is not only surprising, but I hope and believe that the shareholder message sent will be the first step in bringing good corporate governance to this great company - something that has been lacking for decades.”
In the beginning of the week, Forest released its latest quarterly earnings. It reported that its net sales decreased for the quarter by 41.6 percent for its third quarter 2013, and its revenue decreased 34.7 percent in its nine months ending Dec. 31.
The decreases in sales, as Solomon noted, were mostly incurred due to the expiration of the patents for one of its products, Lexapro, as well as its declining sales in the latest two quarters. For 2013, the company anticipates that the release of several new products and business development transactions would anchor revenue growth for Forest.
Forest is an international pharmaceutical manufacturer and marketer. Its stock is down 2.11 percent and is trading at $37.10.
View Forest Laboratories’ 10-Year Financials.
Hain Celestial Group Inc. (NASDAQ:HAIN)
Natural and organic products company, Hain Celestial has a 5.5 percent 10-Year EBITDA growth rate. Its annual EBITDA growth rate is 5.81 percent.
For Hain, 2010 was the year that Icahn was seen making concentrated bets in the company, eventually growing his stake to its current amount of 15.47 percent.
While Icahn is usually on the brink of throwing up verbal fists with companies he is trying to turnaround, it was different, and rather peaceful with Hain Celestial, who welcomed Carl’s two nominees for the company’s board of directors: his son Brett Icahn and David Schecter.
"Hain has a strong portfolio of brands that position it well for a continuing secular shift towards organic and all natural foods and consumer packaged goods," said Carl. "We look forward to working with the current board and management toward enhancing stockholder value."
Headquartered in Melville, NY, Hain’s organic products can be found in North America and Europe.
In its latest quarterly report releases in November, Hain turned in net sales which increased 25.4 percent, a GAAP net income that increased 56.6 percent, and an operating free cash flow that increased 23.8 percent in its trailing twelve months that ended Sept. 30.
Its revenue growth in the past 10 years has been attractive, trending positively at an annual rate of 11.71 percent.
Hain’s stock is trading at $53.10. Its market value has gone up by 94.18 percent in the last five years.
View Hain Celestial’s 10-Year Financials.
View the full list using GuruFocus All-In-One Screener. View Icahn’s latest trades here. Also view his undervalued stocks, top growth companies and high yield stocks.
Become a GuruFocus Premium Member!
GuruFocus’ long list of Premium Membership perks provides many opportunities to follow your favorite Gurus and stocks more closely. If you are not a Premium Member yet, we invite you for a 7-Day Free Trial.