(GuruFocus, February 14, 2010) Carl Icahn is the opposite of Warren Buffett. Buffett looks for companies with good economic moats under good managers, then he will either to take the whole company private or take a minority position in the company. Either way, the precondition for Buffett to take a interest in a company is for it to possess a competent and honest management. Buffett does not supply managers. Carl Icahn, on the other hand, believes that managements and board of directors in the US are mostly either incompetent, corrupted, or both. If he sees a suitable target, he will build a stake a position, announce the interest, and demand company to make strategic changes to unleash its value.
Robert Shiller, a Yale Business School professor brought Carl Icahn as a guest lecturer to Shiller’s Financial Markets class. Lecture 15 of the class features Carl Icahn. He discusses his thoughts about today's economy and American businesses and their inherent threats and opportunities. He believes that the biggest challenge facing corporate America is weak management and that today's CEOs, with exceptions, might not be the most capable of leading global companies. In the video, someone asked a question on Motorola proxy fight, an event happened in 2007, so the video is 2-3 years old.
In the lecture, Icahn summarized his investment strategy:
One of the recent success stories of Carl Icahn is his investment in Imclone. He bought 40% of Imclone when it dropped from $74 per share in December 2001 to $14 in February 2002. In 2008, Eli Lilly bought Imclone for $70 per share, at a 51% premium to Imclone’s closing price on July 30 2008.
So watch how he invests his money!
No. 1: Motorola Inc. (MOT, Financial), Weightings: 32.35% - 119,790,447 Shares
Motorola, Inc. is a global leader in providing integrated communications solutions and embedded electronic solutions. Motorola Inc. has a market cap of $16.52 billion; its shares were traded at around $7.15 with a P/E ratio of 357.5 and P/S ratio of 0.8.
Carl Icahn amassed at peak time 2Q of 2008 144 million shares. He sold it down to 120 million shares in 4Q08 and has kept his shares since then.
Icahn's involvement with Motorola went back three years ago:
Finally, Icahn may have prevailed. It remains to be seen, however, he can profit from the investment.
No. 2: Biogen Idec Inc (BIIB, Financial), Weightings: 23.94% - 12,860,205 Shares
Biogen Idec Pharmaceuticals Corporation is a biopharmaceutical company engaged primarily in the research, development and commercialization of targeted therapies for the treatment of cancer and autoimmune and inflammatory diseases. Biogen Idec Inc has a market cap of $15.97 billion; its shares were traded at around $55.21 with a P/E ratio of 14.6 and P/S ratio of 3.9.
Icahn started to accumulate a position in BIIB in 2Q07, and by 3Q08, he had 14 million shares. He sold down to 12.86 million shares in 4Q08 and has maintained his shares since then.
Recently, Carl Icahn is trying to add 3 more seats to the Biogen Idec Inc (BIIB) board of directors through a proxy fight. This is in addition to 2 seats that he already controls. He is also trying to lock the number of seats to 13. By doing this, he prevents any potential dilution of the board of directors. At the same time, he will essentially have strong oversight of the company.
BIIB stock prices, however, have not been pushed just because Icahn’s activist interest in the company. It has shot up to nearly $80 in 3Q07, after the Icahn reported his position. Since then, however, the stock declined to as low as $40 in sympathy with the general market. Nowadays, it is trading around $55, in a range where Icahn bought his stocks.
No. 3: CIT Group Inc. (CIT, Financial), Weightings: 9.33% - 9,705,373 Shares
CIT Group Inc. is a bank holding company that provides financing and leasing capital for commercial companies throughout the world. Cit Group Inc. has a market cap of $13.05 billion; its shares were traded at around $32.25.
CIT file for bankruptcy in November of last year. Its emerged from the bankruptcy with former bond holder becoming new share holders. Icahn should have obtained his shares because of his bond holdings.
No. 4: Genzyme Corp. (GENZ, Financial), Weightings: 8.18% - 4,798,243 Shares
Genzyme Corporation is a global biotechnology company dedicated to making a major positive impact on the lives of people with serious diseases. Genzyme Corp. has a market cap of $14.79 billion; its shares were traded at around $55.73 with a P/E ratio of 19.7 and P/S ratio of 3.1. Genzyme Corp. had an annual average earning growth of 20.2% over the past 10 years. GuruFocus rated Genzyme Corp.the business predictability rank of 4-star.
Icahn likes to play activist in the biotech space. After Biogen, this is another biotech company in his top holding. He actually bought over 3.3 million shares during the 4Q of 2010.
No. 5: Yahoo! Inc. (YHOO, Financial), Weightings: 7% - 11,991,000 Shares
Yahoo! Inc. is a global Internet communications, commerce and media company. Yahoo! Inc. has a market cap of $21.25 billion; its shares were traded at around $15.17 with a P/E ratio of 42.2 and P/S ratio of 3.2. Yahoo! Inc. had an annual average earning growth of 20.4% over the past 5 years.
IIt appears Carl Icahn is on his way out with Yahoo! But it has been an interesting fight:
He reported 60 million shares in 2Q09, 50 million in 3Q09, and as of December 31, 2009, he reported a mere 12 million position in the company. It is hard to believe that Icahn made money on this high profile trade as he bought most of his shares in 2Q08 when the stock price was much higher. In a sense, Icahn won most of the battles with Yahoo!'s management, but lost his war.
No. 6: Amylin Pharmaceuticals Inc. (AMLN, Financial), Weightings: 6.41% - 12,971,328 Shares
Amylin Pharmaceuticals is a biopharmaceutical company committed to improving lives through the discovery, development and commercialization of innovative medicines. Amylin Pharmaceuticals Inc. has a market cap of $2.55 billion; its shares were traded at around $18.01 with and P/S ratio of 3.3.
Icahn reported that he maintained his position of 13 million shares during 4Q09. Together with Biogen and Genzyme, Icahn has three out of six top stocks in the biotech space.
Conclusion
If one of the reasons attracting Carl Icahn to take a interest in a company is its incompetent management, then the managers in the biotech companies have much homework to do.
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Robert Shiller, a Yale Business School professor brought Carl Icahn as a guest lecturer to Shiller’s Financial Markets class. Lecture 15 of the class features Carl Icahn. He discusses his thoughts about today's economy and American businesses and their inherent threats and opportunities. He believes that the biggest challenge facing corporate America is weak management and that today's CEOs, with exceptions, might not be the most capable of leading global companies. In the video, someone asked a question on Motorola proxy fight, an event happened in 2007, so the video is 2-3 years old.
In the lecture, Icahn summarized his investment strategy:
What I do today still is pretty much the same idea. You buy stocks in a company that is cheap and you look at the asset value of the companies that you buy the stocks in and it becomes a little more complex. Basically, you look for the reason that they’re really cheap and the major reason is often–and usually–very poor management. In a sense, it’s like an arbitrage. You go in; you buy a lot of stock in a company; and you then try to make changes at the company.
One of the recent success stories of Carl Icahn is his investment in Imclone. He bought 40% of Imclone when it dropped from $74 per share in December 2001 to $14 in February 2002. In 2008, Eli Lilly bought Imclone for $70 per share, at a 51% premium to Imclone’s closing price on July 30 2008.
So watch how he invests his money!
No. 1: Motorola Inc. (MOT, Financial), Weightings: 32.35% - 119,790,447 Shares
Motorola, Inc. is a global leader in providing integrated communications solutions and embedded electronic solutions. Motorola Inc. has a market cap of $16.52 billion; its shares were traded at around $7.15 with a P/E ratio of 357.5 and P/S ratio of 0.8.
Carl Icahn amassed at peak time 2Q of 2008 144 million shares. He sold it down to 120 million shares in 4Q08 and has kept his shares since then.
Icahn's involvement with Motorola went back three years ago:
On January 30, 2007 Motorola said it received notice that Icahn owns about 33.5 million shares, representing a 1.39% interest in the company and pressed for a seat on its board. But he was turned down by the majority of the stock holders in the election for Board Directors which was held on May 8.
On May 7, 2007, Icahn's quest for a board seat on Motorola is effectively ended, as the company announced the next day that in a preliminary count of the votes for board members Icahn did not have enough to be elected. Icahn stated that he would not sell his shares in the company.
On March 24, 2008 Icahn sued Motorola as part of his efforts to gain 4 seats on Motorola's Board and force a sale of its mobile business.
On March 4, according to this NY Times blog article, Mr. Icahn remained bullish on Motorola and Yahoo and he said he saw tremendous opportunities investing in distressed companies. In the same article Icahn called Motorola a “tale of two companies” as the company’s mobile broadband business continues to exceed expectations, but phone sales have been severely hurt by a new offering from the BlackBerry maker Research in Motion (RIMM) and Apple’s (AAPL) iPhone.
On February 11, 2009, Motorola said that it plans to split itself up into two separate companies in the first quarter of 2011. One entity will include the company’s mobile devices and home businesses, and the other will include enterprise mobility solutions and networks businesses.
Finally, Icahn may have prevailed. It remains to be seen, however, he can profit from the investment.
No. 2: Biogen Idec Inc (BIIB, Financial), Weightings: 23.94% - 12,860,205 Shares
Biogen Idec Pharmaceuticals Corporation is a biopharmaceutical company engaged primarily in the research, development and commercialization of targeted therapies for the treatment of cancer and autoimmune and inflammatory diseases. Biogen Idec Inc has a market cap of $15.97 billion; its shares were traded at around $55.21 with a P/E ratio of 14.6 and P/S ratio of 3.9.
Icahn started to accumulate a position in BIIB in 2Q07, and by 3Q08, he had 14 million shares. He sold down to 12.86 million shares in 4Q08 and has maintained his shares since then.
Recently, Carl Icahn is trying to add 3 more seats to the Biogen Idec Inc (BIIB) board of directors through a proxy fight. This is in addition to 2 seats that he already controls. He is also trying to lock the number of seats to 13. By doing this, he prevents any potential dilution of the board of directors. At the same time, he will essentially have strong oversight of the company.
BIIB stock prices, however, have not been pushed just because Icahn’s activist interest in the company. It has shot up to nearly $80 in 3Q07, after the Icahn reported his position. Since then, however, the stock declined to as low as $40 in sympathy with the general market. Nowadays, it is trading around $55, in a range where Icahn bought his stocks.
No. 3: CIT Group Inc. (CIT, Financial), Weightings: 9.33% - 9,705,373 Shares
CIT Group Inc. is a bank holding company that provides financing and leasing capital for commercial companies throughout the world. Cit Group Inc. has a market cap of $13.05 billion; its shares were traded at around $32.25.
CIT file for bankruptcy in November of last year. Its emerged from the bankruptcy with former bond holder becoming new share holders. Icahn should have obtained his shares because of his bond holdings.
No. 4: Genzyme Corp. (GENZ, Financial), Weightings: 8.18% - 4,798,243 Shares
Genzyme Corporation is a global biotechnology company dedicated to making a major positive impact on the lives of people with serious diseases. Genzyme Corp. has a market cap of $14.79 billion; its shares were traded at around $55.73 with a P/E ratio of 19.7 and P/S ratio of 3.1. Genzyme Corp. had an annual average earning growth of 20.2% over the past 10 years. GuruFocus rated Genzyme Corp.the business predictability rank of 4-star.
Icahn likes to play activist in the biotech space. After Biogen, this is another biotech company in his top holding. He actually bought over 3.3 million shares during the 4Q of 2010.
No. 5: Yahoo! Inc. (YHOO, Financial), Weightings: 7% - 11,991,000 Shares
Yahoo! Inc. is a global Internet communications, commerce and media company. Yahoo! Inc. has a market cap of $21.25 billion; its shares were traded at around $15.17 with a P/E ratio of 42.2 and P/S ratio of 3.2. Yahoo! Inc. had an annual average earning growth of 20.4% over the past 5 years.
IIt appears Carl Icahn is on his way out with Yahoo! But it has been an interesting fight:
On May 13, 2008 Carl Icahn purchased as many as 50 million shares of Yahoo, leaning toward launching a proxy contest.
On May 15, 2008 Icahn confirmed that he would be commencing a proxy fight to remove Yahoo's Board of Directors in response to their "irrational" actions in rejecting Microsoft's takeover bid.
On July 21, 2008 Icahn agreed to join Yahoo's Board of Directors in a deal that would end the proxy fight. According to the agreement, the Yahoo Board will expand by two directors to eleven members. Eight directors will stand for re-election while the remaining three seats will include Icahn and two nominees that Icahn will recommend.
In November 18, 2008, Jerry Yang resigned from the post of Chief Executive Officer of Yahoo!
On October 23, 2009, Icahn resigned from Yahoo’s board of Directors.
He reported 60 million shares in 2Q09, 50 million in 3Q09, and as of December 31, 2009, he reported a mere 12 million position in the company. It is hard to believe that Icahn made money on this high profile trade as he bought most of his shares in 2Q08 when the stock price was much higher. In a sense, Icahn won most of the battles with Yahoo!'s management, but lost his war.
No. 6: Amylin Pharmaceuticals Inc. (AMLN, Financial), Weightings: 6.41% - 12,971,328 Shares
Amylin Pharmaceuticals is a biopharmaceutical company committed to improving lives through the discovery, development and commercialization of innovative medicines. Amylin Pharmaceuticals Inc. has a market cap of $2.55 billion; its shares were traded at around $18.01 with and P/S ratio of 3.3.
Icahn reported that he maintained his position of 13 million shares during 4Q09. Together with Biogen and Genzyme, Icahn has three out of six top stocks in the biotech space.
Conclusion
If one of the reasons attracting Carl Icahn to take a interest in a company is its incompetent management, then the managers in the biotech companies have much homework to do.
GuruFocus provides real time information and insights of Investment Gurus such as Warren Buffett and Carl Icahn for Premium Members. If you are not a premium member, click here to sign up or upgrade. 7-Day Free Trial is available.
