Icahn Capital Management recently disclosed its portfolio updates for the first quarter of 2020, which ended on March 31.
Carl Icahn (Trades, Portfolio) founded Icahn Capital Management in 1987. He is also the largest shareholder in the investment firm’s underlying conglomerate company, Icahn Enterprises LP (IEP). 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.
During the first quarter, Icahn added one new position, Delek US Holdings Inc. (DK, Financial), to the equity portfolio and added to the holdings in Occidental Petroleum Corp (OXY, Financial), Hertz Global Holdings Inc. (HTZ, Financial), Newell Brands Inc. (NWL, Financial), Cheniere Energy Inc. (LNG, Financial) and Welbilt Inc. (WBT, Financial)
Delek US Holdings
Icahn established a new stake of 10,539,880 shares in Delek US Holdings, impacting the equity portfolio by 0.92%. Shares traded for an average price of $24.05 during the quarter.
Delek is a Tennessee-based downstream energy company. From its four U.S. facilities, the company has the capacity to refine 302,000 barrels of crude oil per day. It also owns a logistics arm and 260 convenience stores and is the country’s largest 7-Eleven licensee.
On May 19, shares of Delek traded around $20.29 for a market cap of $1.53 billion. The price-book ratio of 1.14 and price-sales ratio of 0.17 indicate that the company could be undervalued.
GuruFocus gives the company a financial strength rating of 3 out of 10 and a profitability rating of 6 out of 10. The cash-debt ratio of 0.42 and Altman Z-Score of 1.91 indicate that the company could encounter financial difficulties. The operating margin of 5.29% is lower than 66.45% of competitors. Revenue and net income have been declining in recent quarters.
Occidental Petroleum
The firm increased its position in Occidental Petroleum by 66,055,417 shares, or 292.65%, for a total holding of 88,627,271 shares. The trade impacted the equity portfolio by 4.25%. Shares traded at an average price of $33.31 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.
On March 19, shares of the company traded around $14.65 for a market cap of $13.54 billion. The price-book ratio of 0.6 and price-sales ratio of 0.53 indicate a potential value opportunity.
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 0.08 and Altman-Z score of 0.54 indicate that the company could be in danger of bankruptcy if it cannot raise additional liquidity. The operating margin of 13.8% is higher than 69.79% of competitors, but the return on invested capital is lower than the weighted average cost of capital, indicating lack of profitability.
Hertz Global Holdings
The firm also increased the holding in Hertz Global Holdings by 11,416,257, or 25.99%, bringing the total number of shares owned up to 55,342,109. The trade impacted the equity portfolio by 0.39%. Shares traded at an average price of $13.69 during the quarter.
Hertz Global Holdings is a holding company that operates through its subsidiary car rental and leasing franchises. Its top brand names include Dollar, Thrifty and Hertz. It is headquartered in Estero, Florida and has over 10,200 corporate franchises.
On May 19, shares of Hertz traded around $2.93 apiece for a market cap of $429.70 billion. The price-book ratio of 0.3 and price-sales ratio of 0.04 reflect that the company could represent good value if it can avoid bankruptcy.
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 0.68% and cash-debt ratio of 0.05 indicate that the company is in high danger of bankruptcy. The company has until May 22 to restructure debt payments to avoid bankruptcy, and it is selling off part of its fleet of cars in an attempt to remain solvent. The operating margin of 5.63% is near the industry median of 5.34%.
Newell Brands
Icahn bought 2,585,201 additional shares of Newell Brands, increasing the stake by 6.29% to a total of 43,704,616 shares and impacting the equity portfolio by 0.19%. Shares traded for an average price of $17.33 during the quarter.
Newell Brands is a manufacturer of consumer and commercial goods such as storage containers, trash cans/bags, appliances, cookware, writing tools, home security products, etc. Its brand profile includes Rubbermaid, Crock Pot, Elmer’s and Coleman.
On March 19, shares of Newell traded around $12.64 for a market cap of $5.36 billion. The company turned a net loss for the recent quarter, but the Peter Lynch chart indicates that the stock is trading near what its 2019 earnings were worth.
GuruFocus gives the company a financial strength rating of 3 out of 10 and a profitability rating of 7 out of 10. The cash-debt ratio of 0.05 and Altman Z-Score of 0.21 indicate the company could face bankruptcy within the next few years, but the interest coverage ratio of 2.5 suggests it is able to pay its short-term debt. Revenue has had a general upwards trend, but earnings have been more unpredictable for the company since its 2016 acquisition of Jarden, a company that was twice its size.
Cheniere Energy
The firm added 570,662 shares, or 2.91%, to its investment in Cheniere Energy, bringing the total stake to 20,155,756 shares. The trade had an impact of 0.11% on the equity portfolio. During the quarter, shares traded for an average price of $51.70.
Cheniere Energy is a liquified natural gas company. Based in Houston, it became the first U.S.-based exporter of LNG in 2016.
On March 19, shares of Cheniere traded around $43.13 for a market cap of $10.87 billion and a price-earnings ratio of 14.1. According to the Peter Lynch chart, the stock is trading near its intrinsic value.
GuruFocus gives the company a financial strength rating of 3 out of 10 and a profitability rating of 6 out of 10. The cash-debt ratio of 0.08 and Altman Z-Score of 0.62 indicate the company could be in danger of bankruptcy, though the current ratio of 1.08 suggests short-term stability. The operating margin of 30.72% and strong growth in revenue and earnings suggest high profitability.
Welbilt
Icahn added 1,859,578 shares, or 18.44%, to the Welbilt holding, bringing the total number of shares owned to 11,942,238 and impacting the equity portfolio by 0.05%. Shares traded for an average price of $12.17 during the quarter.
On March 19, shares of Welbilt traded around $5.40 for a market cap of $764.1 million and a price-earnings ratio of 17.99. The Peter Lynch chart suggests that the company is trading near its intrinsic value.
Welbilt manufactures and sells high-quality commercial kitchen equipment and solutions to top chefs, premier chain restaurant operators and others who produce food on a restaurant scale. The company’s portfolio of 12 brands, all ranked first or second worldwide in terms of quality, provides a full commercial kitchen’s worth of solutions.
GuruFocus gives the company 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 1.52 are lower than 89.86% of competitors and indicate a risk of financial difficulties. Revenue has been fairly flat in recent years, while earnings have slowly declined, due largely to divestitures.
Portfolio overview
At the end of the quarter, Icahn Capital Management held shares of 19 stocks in an equity portfolio valued at $18 billion. The top holdings were Icahn Enterprises LP (IEP) with 53% of the equity portfolio, CVR Energy Inc. (CVI) with 6.54% and HP Inc. (HPQ) with 6.07%.
In terms of sector weighting, the firm was most invested in industrials (through Icahn Enterprises), energy and technology.
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