Carl Icahn (Trades, Portfolio) recently released the fourth-quarter 2019 update for Icahn Capital Management.
Icahn is the businessman and investor who founded Icahn Capital Management in 1987. He is also the largest shareholder in the investment firm’s underlying conglomerate company, Icahn Enterprises LP (IEP, Financial). His activist investing strategy focuses on taking significant positions in companies that are facing negative investor sentiment, aiming to gain enough shares to have some sway with management in order to capitalize on company improvements and market sensationalism. The $26.18 billion equity portfolio is concentrated in 18 stocks.
Taking the above criteria into consideration, Icahn added shares to the firm’s holdings in Icahn Enterprises and Hertz Global Holdings Inc. (HTZ, Financial) and reduced the positions in Occidental Petroleum Corp. (OXY, Financial) and Freeport-McMoRan Inc. (FCX). The activist investor also saw the firm’s fourth-largest holding, Caesars Entertainment Corp. (CZR, Financial), agree to a deal to merge with Eldorado Resorts Inc. (ERI, Financial).
Icahn Enterprises
Icahn added 6,202,053 shares, or 3.35%, to the holding in Icahn Enterprises, bringing the total number of shares owned up to 197,049,652 and impacting the equity portfolio by 1.46%. Shares traded at an average price of $64.63 during the quarter.
Icahn Enterprises is a master limited partnership based in New York. The diversified holding conglomerate primarily operates in investing, energy, automotive, food packaging, real estate, metals and home design.
On Feb. 17, shares of Icahn Enterprises traded around $66.94 for a market cap of $13.89 billion and a price-earnings ratio of 20.41.
GuruFocus has assigned the company a financial strength rating of 4 out of 10 and a profitability rating of 5 out of 10. Revenue and net income declined through 2017, but have been on the rise in recent years.
Hertz Global Holdings
Icahn also increased the stake in Hertz Global Holdings by 2,030,537 shares, or 85%, bringing the total number of shares owned up to 43,925,852. The trade impacted the equity portfolio by 0.12%. Shares traded at an average price of $15.04 during quarter.
Hertz Global Holdings is a holding company that operates through its subsidiary companies, mainly its car rental and leasing franchises through the Dollar, Thrifty and Hertz brands. It is headquartered in Estero, Florida and has over 10,200 corporate franchises.
On Feb. 17, shares traded around $19.71 apiece for a market cap of $2.8 billion. According to the Peter Lynch chart, the stock is trading below its intrinsic value.
Hertz has a GuruFocus financial strength rating of 3 out of 10 and a profitability rating of 5 out of 10. The interest coverage of 0.98% and Altman Z-score of 0.57 are underperforming 94.58% of competitors, though the company has seen revenue growth over the past several years.
Occidental Petroleum Corp.
Icahn reduced the position in Occidental Petroleum by 3,760,534 shares, or 14.28%, leaving a total holding of 22,571,854 shares. The trade impacted the equity portfolio by -0.65%. Shares traded at an average price of $39.98 during the quarter.
Occidental is an oil and gas exploration and production company with facilities in the United States, the Middle East, Latin America and Africa. Among major fossil fuel producers, Occidental ranks first in terms of CO2 EOR (carbon sequestration and reuse) projects. During the third quarter of 2019, Occidental acquired Anadarko Petroleum Corp. for $55 billion, which some analysts considered a negative sign due to the fact that it increased the company’s debt.
On Feb. 17, shares of the company traded around $41.60 for a market cap of $37.16 billion and a price-earnings ratio of 27.19. The Peter Lynch chart suggest that the stock may be overvalued.
GuruFocus has assigned Occidental a financial strength rating of 3 out of 10 and a profitability rating of 7 out of 10. The cash-debt ratio of 0.1 and Altman Z-score of 0.77 are on the low side, but the three-year revenue growth rate of 12.7% is positive.
Freeport-McMoRan Inc.
Icahn also sold 7,410,200 shares, or 21.68%, of the position in Freeport-McMoRan, bringing the total number of shares owned down to 26,770,875 and impacting the equity portfolio by -0.28%. Shares traded at an average price of $11.05 during the quarter.
Freeport is a mining company based in Phoenix. It primarily operates large, long-lived assets with reserves of copper, gold and molybdenum. It is one of the world’s biggest publicly traded copper companies.
On Feb. 17, shares traded around $12.24 for a market cap of $17.76 billion. According to the Peter Lynch chart, shares may be trading above their intrinsic value.
Freeport has a GuruFocus financial strength rating of 4 out of 10 and a profitability rating of 6 out of 10. The interest coverage of 1.09% and Altman Z-score of 0.6% are low, and both revenue and net income declined for full-year 2019.
Caesars Entertainment to merge with Eldorado Resorts
Eldorado, a newer player to the Las Vegas-style hotel and casino niche, is set to acquire Caesars, its venerable elder, in a deal of approximately 77 billion shares in common stock and $7.2 billion in cash. The deal is set to close during the first quarter of 2020. The combined company will operate under the Caesars name, but will be headed by Eldorado’s current leaders.
Icahn owns 114,250,942 shares of the company, which makes up 16.79% of Caesars’ total shares outstanding. The position is the fourth largest in the equity portfolio with a weight of 5.94%.
The merger, which Icahn has long supported, will create an entertainment juggernaut that combines Eldorado’s strong management with Caesars’ scale and reputation.
GuruFocus calculations estimate that the investment has returned a gain of 61.14% so far.
Disclosure: Author owns no shares in any of the stocks mentioned. The mention of stocks in this article does not at any point constitute an investment recommendation. Investors should always conduct their own careful research and/or consult registered investment advisors before taking action in the stock market.
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