Tracking Carl Icahn's Portfolio - Q3 2013 Update

by: John Vincent

This article is part of a series that provides an ongoing analysis of the changes made to Carl Icahn's U.S. stock portfolio on a quarterly basis. It is based on Icahn's regulatory 13F Form filed on 11/14/2013. Please visit our Tracking Carl Icahn's Portfolio series to get an idea of his investment philosophy and the fund's moves in Q2 2013.

This quarter, Icahn's U.S. long portfolio went up from $21.52B to 24.64B, an increase of ~14.50%. The portfolio increased ~27% last quarter as well. The number of holdings in the portfolio decreased from 19 to 18: Dell Inc., Hain Celestial, and WebMD were liquidated and Apple Inc. and Talisman Energy were newly added. The largest holding is Icahn Enterprises (NASDAQ:IEP) with an allocation of just over one-third of the U.S. long portfolio. It is followed by CVR Energy (NYSE:CVI) with an allocation of 11.13%. It is a very concentrated portfolio with the largest five positions accounting for just over two-thirds of the entire portfolio.

Carl Icahn is best known for building sizable stakes in businesses and then pushing for changes to increase shareholder value. To learn more about his investing style and philosophy check-out "King Icahn: The Biography of a Renegade Capitalist".

Stake Disposals:

Dell Inc. (NASDAQ:DELL): DELL was a huge 9.46% of the U.S. long portfolio position first established in Q1 2013. The bulk of the stake was purchased last quarter at a cost-basis of around $13.89. Icahn along with Southeastern Asset Management planned a proxy fight for control of the company. Together, they owned about 14% of the outstanding shares but ultimately had to walk away and settle for the LBO offer from Michael Dell and Silver Lake Management LLC - $13.75/share + $0.13/share special dividend + a guaranteed $0.08/share quarterly dividend payment.

Hain Celestial (NASDAQ:HAIN): HAIN was a relatively small 2.19% of the U.S. long portfolio stake first purchased in 2010. The bulk of the position was purchased in Q2 2011 at prices between $31 and $36. It was disposed of this quarter at prices between $65 and $82. The stock currently trades just outside that range at $84.51. Icahn owned 15.3% of the business as of last quarter and harvested huge gains from the position. The stake elimination indicates a clear bearish bias.

WebMD Health Corp. (NASDAQ:WBMD): WBMD was a very small 0.91% position that had been in the portfolio since 2011. Here again, even though the relative size of the stake was very small, Icahn controlled ~16.75% of the entire business as of last quarter. WBMD had an outstanding year rising 180% so far YTD. Icahn sold his position back to the company at $32.08 per share on 10/21/2013 - there were disagreements with management over whether to pursue a sale of the business or go with a larger buyback.

New Stakes:

Apple Inc. (NASDAQ:AAPL): On 08/13/2013, Icahn revealed a "large position in APPLE" (AAPL) through a Twitter tweet. AAPL price-per-share spiked from $475 to close that day at $489.57. Per the Q3 report, the stake is a huge $1.85B position (~3.9M shares). Icahn has since been pushing for a $150B stock-buyback to increase shareholder value.

Talisman Energy (NYSE:TLM): TLM is a new 0.30% of the U.S. long portfolio position established this quarter. Since the end of the quarter, the stake has been increased by over ten-times, per regulatory schedule 13D filings. He currently controls 6.96% of the business (over 71M shares) and his average cost-basis is around $11.79. The stock currently trades above that price at $12.38. Icahn is very bullish on Talisman Energy and is seeking to engage management regarding "strategic alternatives, board seats, etc."

Stake Decreases:


Stake Increases:

Icahn Enterprises : IEP is a very long-term position that has seen consistent buying over the years. Last quarter, about ~1.4M shares were purchased and it was followed up with a ~1.2M share purchase this quarter. Last year the position size increased from ~79M shares to ~98M shares and since then the purchases have slowed. Most of that buying happened in Q1 2012 at prices between $36.50 and $42.50. The stock currently trades at $119.

Chesapeake Energy (NYSE:CHK): CHK was first purchased in 2010 but was quickly sold. The bulk of the current stake was purchased in Q2 2012 at prices between $14.50 and $23. The stock currently trades at $25.88. Icahn successfully engaged in a proxy fight alongside Southeastern Asset Management that led to the eventual departure of the CEO. Icahn increased the position by another ~10% this quarter, indicating a clear bullish bias. He currently owns around 10% of Chesapeake (66.5M shares).

Federal Mogul (NASDAQ:FDML): FDML is a very long-term stake first purchased in 2000. It went through an asbestos-claim related bankruptcy and emerged in 2007 with Icahn owning over 75% of the outstanding shares, as debt he owned got converted into equity. The position was increased marginally in the last two quarters of 2011 at prices between $13 and $23. This quarter, his share count increased by ~58% (over 44M shares) - the new shares were purchased by exercising FDML's rights offering (In May, Federal-Mogul launched a $500 million stock rights offering whereby shareholders could purchase an additional share for each one they currently held) at $9.78 per share - Icahn got 44M of the 51M shares purchased in the offering. The move paid off almost immediately as the stock currently trades at more than double that price at around $20. Icahn now controls just over 80% of the business. It is Icahn's third-largest position at 8.25% of the U.S. long portfolio.

Nuance Communications (NASDAQ:NUAN): NUAN is a 3.98% of the U.S. long portfolio stake established in Q1 2013 at prices between $18 and $25. The position was increased by roughly two-thirds this quarter at prices between $18.31 and $20. The stock currently trades below the low end of those ranges at $16.28. Icahn's ownership is currently at over 16% of the company (~52M shares). Nuance adopted a poison-pill provision that allowed shareholders to purchase additional shares, if any one shareholder acquired more than 20% of the outstanding shares. On October 8, 2013 Nuance yielded somewhat by appointing two new Icahn recommended directors, thus avoiding a proxy fight, at least for the time being. For investors attempting to follow Icahn, Nuance is a very good option to consider.

Navistar International (NYSE:NAV): This is a relatively small 1.97% of the U.S. long portfolio position that was increased by ~12% this quarter at prices between $27.50 and $40. The stock currently trades at $39.85. Icahn controls around 16% of the business.

The rest of the positions were kept steady:

CVR Energy Inc.: CVI is a huge 11.13% of the U.S. long portfolio position first purchased in Q4 2011. The bulk of the current position (71.2M shares: 80% of the whole business) was purchased through a $35 per share tender offer. The stock currently trades at $37.85: it has been a roller-coaster ride with the stock reaching as high as $72.32 in May but has since been in an extended downtrend. Two MLPs were carved out since the tender: CVR Refining (NYSE:CVRR) the refining portion and CVR Partners (NYSE:UAN) the nitrogen fertilizer unit. CVR Energy owns 71% of CVR Refining and 53% of CVR Partners.

Forest Labs (NYSE:FRX): FRX is a 5.33% of the U.S. long portfolio activist stake first purchased in Q2 2011 at prices between $32.50 and $40. The stock currently trades well outside that range at $51.66. Over the years, the position has been increased by around 10%. Icahn engaged in two proxy battles in the interim and was preparing for a third one this year. A deal with the company in early June avoided that and an Icahn representative was appointed to the company's board as the eleventh member. The CEO was promptly replaced in October. Icahn holds 11.5% of the outstanding shares of FRX. The stock has returned just over 45% so far YTD.

Netflix Inc. (NASDAQ:NFLX): NFLX is 6.95% of the U.S. long portfolio position first purchased in Q3 2012 at prices between $53 and $85. The stake was increased by ~300% in Q4 2012 in the 50s price-range. The stock currently trades at around $350. It was an activist stake and NFLX adopted a poison-pill provision to defend itself. Since then, Icahn backed-off as the company also started posting strong financial results. An October 22nd schedule 13D regulatory filing indicates that more than half the position was disposed of at prices between $304 and $342. Icahn is harvesting large gains from the position.

CVR Refining LP: CVRR is a small 0.61% of the U.S. long portfolio position established in Q1 2013 as a result of the spin-off (carve-out) of CVR Refining from CVR Energy. The position was increased by 50% last quarter at prices between $28 and $35. The stock currently trades well below that range at $23.65.

Herbalife (NYSE:HLF): HLF is a 4.81% of the U.S. long portfolio stake first purchased in Q1 2013 in the high-30s price range. The position was marginally increased last quarter to almost 17M shares. The stock currently trades at $69.40. Bill Ackman is on the other side of this trade - short 20M shares since Q4 2012.

Transocean Ltd. (NYSE:RIG): RIG is a small ~3.88% of the U.S. long portfolio stake first purchased in Q4 2012 at prices between $44.20 and $49.50. The position was increased by ~250% in Q1 2013 at prices between $44 and $60. The stock currently trades at around $55.

Voltari Corporation (NASDAQ:VLTC), American Railcar Inds. (NASDAQ:ARII), Enzon Pharmaceuticals (NASDAQ:ENZN), Mentor Graphics (NASDAQ:MENT), and Take-Two Interactive Software (NASDAQ:TTWO): These are relatively small (less than 2% of the U.S. long portfolio) positions that were held steady this quarter. Although the stakes are small on a relative basis, the percentages owned of the businesses concerned are very significant. Icahn owns 14%, 55.60%, 13.7%, 14.2%, and 12.9% of VLTC, ARII, ENZN, MENT, and TTWO respectively.

The spreadsheet below highlights changes to Icahn's U.S. stock holdings in Q3 2013:

Click to enlarge
(Click to enlarge)

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. 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.