Analyzing Some Of Carl Icahn's Top Holdings

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 |  Includes: AAPL, CVI, NFLX
by: Bret Jensen

Carl Icahn has had one heck of a year. He has "punked" Bill Ackman and made hundreds of millions in the process with his stake in Herbalife (NYSE:HLF). He has ~quadrupled his returns from a well-timed stake in Netflix (NASDAQ:NFLX) and has had great gains in Federal Mogul and other winning stock picks so far in 2013 as well. He is now back in the headlines after taking a recent large stake in Apple (NASDAQ:AAPL). Given the noted billionaire activist's huge year, it seems appropriate to take a look at some of Mr. Icahn's top holdings and what may lie ahead.

Apple is one of the newest of Mr. Icahn's top holdings and he has already met with the company's CEO to push for a $150B stock repurchase program. I outlined the other day some of the other catalysts that could propel the stock further ahead by the end of the year; so I will not dwell too much on this tech giant today.

However, the shares are cheap at ~8x forward earnings once the over $140B in its net cash & marketable securities on its balance sheet is taken into account. In addition, the new versions of its iPhone product line (the 5C/5S) are showing much stronger initial sales than was expected which is triggering upward revisions of earnings estimates by analysts. This one feels like it could be Mr. Icahn's next big winner. STRONG BUY

Netflix has had an amazing run since Mr. Icahn acquired a 5.5% stake in the company at prices ranging from $53 to $85 a share. However, after a monstrous rise I think investors should be extremely cautious here and take some profits if they have not already done so.

The shares sell at more than 200x this year's expected earnings. Revenues are growing nicely and tracking to a ~20% gain for the year which is nice but not something I would want to pay more than 200 times earnings for. In addition, the stock is some $100 a share above the median price target of $236 a share held by the 27 analysts that cover the stock. AVOID

CVR Energy (NYSE:CVI) is an energy partnership that engages in petroleum refining and nitrogen fertilizer manufacturing activities in the United States. Mr. Icahn has a ~80% ownership stake. Like most refiners the stock has had a very challenging last half a year and the stock is down some 40% since its highs in the second quarter.

One of the most attractive features of CVI is its high dividend yield (7.7%). It also has paid an additional $12 a share in special dividends this year. The company has managed to more than triple its operational cash flow since the end of FY2010. The shares are cheap at less than 5x operating cash flow and the company has over $400mm in net cash on its balance sheet. The firm faces some of the same short term issues that most refiners & fertilizer makers are currently encountering, but the stock is attractive on a longer term basis. ACCUMULATE

Disclosure: I am long AAPL. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.