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Carl Icahn Discards HP Stake in the 2nd Quarter

Activist investor releases quarterly portfolio

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Aug 17, 2020
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Carl Icahn (Trades, Portfolio), board chairman of Icahn Enterprises LP (IEP, Financial), disclosed last week that his top sells during the second quarter were HP Inc. (HPQ), Hertz Global Holdings Inc. (HTZ, Financial) and Freeport-McMoRan Inc. (FCX, Financial).

Through his three investing vehicles, which include Icahn Capital Management, Icahn takes minority stakes in out-of-favor companies, pushes for changes and then sells the stake once the company reaches its fair value.

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As of quarter-end, Icahn's $19.73 billion equity portfolio contains 16 stocks, with no new positions and a turnover ratio of 2%. The equity portfolio contains a 50.41% weight in Icahn Enterprises, followed by a 21.54% weight in the energy sector and an 11.55% weight in the consumer defensive sector.

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HP

Icahn sold 62,902,970 shares of HP, reducing the equity portfolio 6.07%. Shares averaged $15.93 during the second quarter; based on GuruFocus estimates, Icahn took a loss of approximately 18.89% on the stock since the initial purchase during the third quarter of 2019.

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Icahn said in a Dec. 4, 2019 open letter to HP's board of directors that he took the stake to push for the merger between the Palo Alto, California-based computer giant and Norwalk, Connecticut-based multifunction printer company Xerox Holdings Corp. (

XRX, Financial). The investor chastised HP's board of directors' "unreasonable refusal to engage in a customary mutual due diligence process," prolonging the combination that could yield over $2 billion in cost synergies according to Icahn's letter.

Xerox ended merger talks with HP in March, citing macroeconomic and microeconomic turmoil stemming from the coronavirus pandemic.

GuruFocus ranks HP's profitability 7 out of 10 on the back of profit margins outperforming over 66% of global competitors and returns on assets outperforming over 85% of global hardware companies.

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Hertz

Icahn sold 55,342,109 shares of Hertz, reducing the equity portfolio 1.90%. Shares of the embattled car dealer averaged $3.26 during the second quarter.

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According to GuruFocus Real-Time Picks, a Premium feature, Icahn disclosed the transaction on May 26, with shares trading around just 56 cents per share. GuruFocus ranks the Estero, Florida-based company's financial strength 2 out of 10 on several warning signs, which include a weak Altman Z-score of 0.3 and debt ratios that underperform over 90% of global competitors.

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Freeport-McMoRan

Icahn sold 26,770,875 shares of Freeport-McMoRan, reducing the equity portfolio 1%. Shares averaged $9.11 during the second quarter. Based on GuruFocus estimates, Icahn has gained approximately 10.58% on the stock since initially buying shares during the third quarter of 2015.

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GuruFocus ranks the Phoenix-based copper producer's financial strength 3 out of 10 on the back of debt ratios underperforming over 77% of global competitors, coupled with a low Piotroski F-score of 3.

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See also

According to GuruFocus Real-Time Picks, a Premium feature, Icahn reported as of Aug. 12 a holding of 26,578,684 shares in Xerox, approximately 12.48% of the company's total shares outstanding.

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GuruFocus ranks Xerox's profitability 6 out of 10: Even though revenues are declining approximately 2.6% per year on average over the past three years, a rate that underperforms over 75% of global competitors, its net margin and return on equity are outperforming over 83% of global software companies.

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Disclosure: No positions.

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