Carl Icahn (Trades, Portfolio) has revealed his portfolio for the first quarter of 2021. Top trades include additions to the guru's Bausch Health Companies Inc. (BHC, Financial) and Dana Inc. (DAN, Financial) holdings, reductions in Herbalife Nutrition Ltd. (HLF, Financial) and Occidental Petroleum Corp. (OXY, Financial) and a singular new buy in FirstEnergy Corp. (FE, Financial).
Icahn is known for taking activist positions in undervalued, struggling companies and working with management in order to improve profitability as well as unlock value for shareholders. He seeks to avoid consensus thinking and believes the momentum with trends will always fall apart.
Portfolio overview
At the end of the quarter, Icahn's portfolio contained 19 stocks, with one new holding in FirstEnergy. It was valued at $23.85 billion and has seen a turnover rate of 8%. Top holdings in the portfolio include Icahn Enterprises LP (IEP, Financial), Occidental Petroleum, CVR Energy Inc. (CVI, Financial), Newell Brands Inc. (NWL, Financial) and Cheniere Energy Inc. (LNG, Financial).
The top three sectors represented are industrials (55.76%), energy (21.25%) and technology (6.67%).
Bausch Health
The largest change to Icahn's portfolio came from a massive addition to his Bausch Health (BHC, Financial) holding. The guru purchased an additional 29.07 million shares to grow the holding by 577.69%. During the quarter, the shares traded at an average price of $29.36. Overall, the purchase had a 3.87% impact on the equity portfolio and GuruFocus estimates the total gain of the holding at 11.15%.
Formerly known as Valeant Pharmaceuticals, Bausch Health is a global specialty pharmaceutical, consumer health and medical device company with a focus on branded products for the dermatology, gastrointestinal and ophthalmology markets. Bausch is the market leader in consumer visioncare in India and China, and the fourth-largest visioncare company by sales in the United States.
On May 20, the stock was trading at $30.95 per share with a market cap of $11.11 billion. According to the GF Value Line, the shares are trading at a significantly overvalued rating.
GuruFocus gives the company a financial strength rating of 2 out of 10 and a profitability rank of 4 out of 10. There are currently five severe warning signs issued, including extremely low interest coverage and poor financial strength. The company's cash-to-debt ratio of 0.03 ranks it worse than 94.55% of the industry and an Altman Z-Score of 0.12 places it deep into the distress column.
Herbalife Nutrition
Icahn slashed his Herbalife Nutrition (HLF, Financial) holding during the quarter by 60.89% with the sale of 12.48 million shares. The shares traded at an average price of $49.42 throughout the quarter. GuruFocus estimates Icahn has gained a total of 70.53% on the holding and the sale had a -2.99% impact on the equity portfolio.
Herbalife Nutrition is an international nutrition company. The company has five revenue segments: weight management, targeted nutrition, energy, sports and fitness, outer nutrition and literature, promotional and other. The most important segment, weight management, contributing more than 50% of revenue, has as representative products protein drinks, powder and bars and herbal tea concentrates, among others. Geographically, the main segments are North America, Mexico, South and Central America, Europe, the Middle East and Africa, Asia-Pacific and China.
As of May 20, the stock was trading at $50.57 per share with a market cap of $5.46 billion. The shares are modestly undervalued according to the GF Value Line.
GuruFocous gives the company a financial strength rating of 4 out of 10, a profitability rank of 9 out of 10 and a valuation rank of 9 out of 10. There are currently no severe warning signs issued for the company. The strong profitability rank is propped up by solid operating and net margins that are both overshadowed by a return on assets that ranks the company better than 92.88% of the industry.
FirstEnergy
Icahn's one new holding for the quarter came from a new purchase into FirstEnergy (FE, Financial). The guru established the position with 18.96 million shares that were purchased at an average price of $32.64 throughout the quarter. The purchase had a 2.76% impact on the portfolio and GuruFocus estimates the total gain of the holding at 15.95% in its short lifetime.
FirstEnergy is one of the largest investor-owned utilities in the United States with 10 distribution utilities serving 6 million customers in six mid-Atlantic and Midwestern states. FirstEnergy also owns and operates one of the nation's largest transmission systems with more than 24,500 miles of lines.
FirstEnergy was trading at $37.70 per share with a market cap of $20.52 billion on May 20. The shares are given a fair value rating by the GF Value Line.
GuruFocus gives the company a financial strength rating of 3 out of 10, a profitability rank of 5 out of 10 and a valuation rank of 5 out of 10. There are currently four severe warning signs issued, including new long-term debt and an Altman Z-Score of 0.65 indicating a higher likelihood of bankruptcy. The company has struggled over the last several years to balance out the return on invested capital compared to the weighted average cost of capital.
Dana
The guru's holding in Dana also saw a boost during the first quarter. The 8.05 million shares purchased grew the holding by 201.98%. Overall, the purchase had a 0.82% impact on the equity portfolio and GuruFocus estimates the total gain of the holding at 24.64%.
Dana is a supplier of driveline (axles, driveshafts, and transmissions), sealing and thermal-management technologies for vehicles with both conventional and alternative-energy powertrains. The company produces for original equipment manufacturers and the aftermarket for Light Vehicle Driveline Technologies (Light Vehicle), Commercial Vehicle Driveline Technologies (Commercial Vehicle), Off-Highway Drive and Motion Technologies (Off-Highway) and Power Technologies. Dana generates the majority of its revenue from its light vehicle segment, selling primarily to Ford, Hyundai, Tata, Nissan, GM and Toyota. The company's largest end market is North America.
On May 20, the stock was trading at $25.86 per share with a market cap of $3.75 billion. The shares are significantly overvalued as seen on the GF Value Line.
GuruFocus gives the company a financial strength rating of 4 out of 10, a profitability rank of 7 out of 10 and a valuation rank of 5 out of 10. There are currently five severe warning signs issued, including declining gross and operating margins. Net income dropped into negative values in 2020 for the first time since 2009.
Occidental Petroleum
Rounding out Icahn's top five trades of the quarter was a reduction in one of his largest holdings Occidental Petroleum (OXY, Financial). The guru cut the holding by 12.07% with the sale of 8.09 million shares. During the quarter, the shares traded at an average price of $24.23. The guru has lost an estimated 34.24% on the holding and the sale had a -0.22% impact overall.
Occidental Petroleum is an independent exploration and production company with operations in the United States, Latin America and the Middle East. At the end of 2020, the company reported net proved reserves of 2.9 billion barrels of oil equivalent. Net production averaged 1,306 thousand barrels of oil equivalent per day in 2020 at a ratio of 74% oil and natural gas liquids and 26% natural gas.
As of May 20, the stock was trading at $25.06 per share with a market cap of $23.24 billion. According to the GF Value Line, the shares are trading at a modestly undervalued rating.
GuruFocus gives the company a financial strength rating of 3 out of 10, a profitability rank of 5 out of 10 and a valuation rank of 8 out of 10. There are currently five severe warning signs issued, including assets growing faster than revenue and poor financial strength. Prior to 2014, the company had relatively consistent cash flows, but has struggled to maintain consistent free cash flow since then.
Disclosure: Author owns no stocks mentioned.
Not a Premium Member of GuruFocus? Sign up for a free 7-day trial here.
Also check out:
