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Bram de Haas
Bram de Haas
Articles (439)  | Author's Website |

Carl Icahn: A Believer in Value Investing

Icahn believes Graham and Dodd-style investing will do well from here

April 26, 2020 | About:

Legendary activist investor Carl Icahn (Trades, Portfolio) went on Bloomberg for an interview on April 24, 2020. Here are my notes on the interview.

Icahn has run a hedged book over the past few years, but he still lost some money in the sell-off. He notes that people in the healthcare industry are more dejected than he's ever seen. Icahn agrees that the virus will be around in spurts. Thus, rather than technology or high multiple stocks, the opportunity is going to be in the "Graham and Dodd" type of stocks.

Icahn doesn’t believe the multiples on some software companies are justified. He is shorting the S&P 500. His biggest position is insurance on one of the CMBX indices, which are a group of indices on commercial real estate mortgage-backed securities. Putnam sells retail investors yield vehicles with 6%-7% yield on this type of investment, but they are sold as much more safe than they the underlying assets. Icahn is making a lot of money on that insurance. Icahn has billions and billions worth of this trade, as it has a beautiful risk/reward.

Icahn didn't want to say too much about his position in Occidental Petroleum (NYSE:OXY). He has board representation now, but he didn’t like the debt issuance deal with Warren Buffett. He believes the risk/reward on the stock is good, as they have some great assets. If oil stays bad, there is risk in all of this stuff. Occidental has a market cap of $12 billion but an Enterprise value of $60 billion. It trades below two times free cash flow.

Icahn also owns a lot of  car rental company Hertz (NYSE:HTZ), but people aren’t renting cars due to the pandemic. It is a highly levered situation with rental cars as the underlying security. Icahn is also on the board there. He didn't comment on whether it will get restructured. Hertz has a $562 million market cap, while the enterprise value is about $18 billion. It trades at 0.2 times free cash flow and at 0.32 times book value.

Disclosure: Author owns Occidental debt and is long Icahn Enterprise Partners (IEP)

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About the author:

Bram de Haas
Bram de Haas is managing editor of The Special Situations Report and Founder of Starshot Capital B.V.

Visit Bram de Haas's Website


Rating: 5.0/5 (4 votes)

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Comments

asawhneyy
Asawhneyy - 2 months ago    Report SPAM

How come IEP- has not done well -you are looking for cult to believe in--he has been bearish for 12 years on the market-you dont get his play book-in public he puts down every big investor.

Iep has done so bad--

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