Activist investor Carl Icahn (Trades, Portfolio) has portended doom for markets possibly the loudest of any prognosticator with his video “Danger Ahead,” but he hasn’t pulled all of his money out. In fact, he has purchased several greater-than 5% stakes in the third quarter and added more shares to existing holdings, including boosting his holding of Cheniere Energy (LNG, Financial) on Monday.
He also, in the second quarter, sold sparingly, exiting only his position in Netflix Inc. (NFLX, Financial) and cutting his position in Gannett Co. (GCI, Financial) by 50%.
Instead, the guru told CNBC that he is, ”more hedged than I’ve been in years” as he believes stocks could go down a lot more. “The fed may have backed itself into a corner – they should absolutely have raised rates six months ago,” he said. “It’s more difficult to do that now because of concerns over china and emerging markets.”
Among the many concerns about the economic landscape enumerated in his video, for companies, Icahn said he did not think many of them were reporting earnings clearly enough, were inflating them with buybacks and were misspending low-interest-rate money on acquisitions rather than reinvesting in their businesses.
Icahn has concentrated the top long companies in his $31.2 billion portfolio with the largest five (excluding his own company, Icahn Enterprises LP (IEP, Financial)) representing almost half of it, and on several he has seen substantial gains. As he awaits conditions he believes could rival the crash of 2007 and 2008, Icahn has positioned his portfolio with these companies at the top as of second quarter-end: Apple Inc. (AAPL, Financial), CVR Energy Inc. (CVI, Financial), PayPal Holdings Inc. (PYPL, Financial), Federal-Mogul Holdings Corp. (FDML, Financial) and Hologic Inc. (HOLX, Financial).
Icahn held 52,760,848 shares of Apple Inc. at the end of the second quarter, representing 21.2% of his portfolio. He bought Apple at an average share price of $71 beginning in the third quarter of 2013, for an estimate total gain of 55% based on the Tuesday afternoon share price of $109.79. Icahn has not added to the position since the first quarter of 2014.
Icahn has praised Apple on a numerous occasions, most recently saying in his video: “A lot of companies that are doing buybacks shouldn’t be doing them. When you start doing those buybacks, what it does is it’s a short-term fix. But, it weakens the balance sheet. Now, I have been a proponent for buybacks in companies like Apple, where they’re sitting with $200 billion in cash and not a lot of debt, they should do buybacks. Especially at Apple with its stock is nine times earnings.”
Apple Inc. is a California corporation established in 1977. Apple Inc. has a market cap of $630.32 billion; its shares were traded around $110.53 with a P/E ratio of 12.73 and P/S ratio of 2.88. The dividend yield of Apple Inc. stocks is 1.79%. Apple Inc. had an annual average earnings growth of 59.1% over the past 10 years. GuruFocus rated Apple Inc. the business predictability rank of 4.5-star.
CVR Energy Inc. (CVI, Financial)
Icahn held 71,198,718 shares of CVR Energy Inc., or 82% of its shares outstanding. The holding represents 8.59% of the portfolio. Icahn purchased CVI Energy Inc. for three quarters beginning in the fourth quarter of 2011 and has not added shares since. On his average purchase price of $27 per share he has an estimated gain of 44% at Tuesday’s trading price of $39.
CVR Energy Inc. was incorporated in Delaware in September 2006. CVR Energy Inc. has a market cap of $3.39 billion; its shares were traded around $39.00 with a P/E ratio of 28.33 and P/S ratio of 0.48. The dividend yield of CVR Energy Inc. stocks is 5.76%. CVR Energy Inc. had an annual average earnings growth of 33.1% over the past five years.
PayPal Holdings Inc. (PYPL, Financial)
Icahn held 46,271,370 shares of PayPal Holdings, or 3.8% of shares outstanding. The holding reflected 5.7% of his portfolio.
Paypal Holdings Inc. has a market cap of $37.12 billion; its shares were traded at around $30.46 with a P/E ratio of 98.23 and P/S ratio of 4.47.
Federal-Mogul Holdings Corp. (FDML, Financial)
Icahn held 138,590,141 shares of Federal Mogul Holdings, or 82% of outstanding shares. The holding represents 5% of his portfolio. Icahn started a stake in the company in third quarter 2013 and last added shares in first quarter 2015 when the price averaged $14 per share. The company’s shares trade around $6.82 on Tuesday.
Federal-Mogul Holdings Corp. is a supplier of technology and innovation in vehicle and industrial products for fuel economy, emissions reduction and safety systems. Federal-mogul Holdings Corp. has a market cap of $1.15 billion; its shares were traded with a P/S ratio of 0.14.
Hologic Inc. (HOLX, Financial)
Icahn acquired 34,154,879 shares of Hologic in fourth quarter 2013 at an average price of $22 and did not add or sell shares until Aug. 4, 2015, when he sold 6 million shares at an average price of $41. His holding of 28,154,879 shares after the sell represents 12.1% of shares outstanding and 4.2% of his portfolio. Based on his purchase price of $22 per share and Tuesday’s price around $37.63, he has a total estimated gain of 74% of the company.
Hologic Inc. was incorporated in Massachusetts in October 1985 and reincorporated in Delaware in March 1990. Hologic Inc. has a market cap of $10.61 billion; its shares were traded with a P/E ratio of 80.67 and P/S ratio of 4.07.
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