"Fortune sides with him who dares" - Virgil
My investment experience has been built over several decades. I have followed noted investors such as Warren Buffett, George Soros, Peter Lynch and others over that time period trying to pick up tips & strategies to make myself a more successful investor.
Every investor has had times when it seems that everything they buy turns to gold and vice versa. I have seen hedge fund titans have great runs as well. However, I don't think I have ever seen a winning streak like the one Carl Icahn has strung together over the past year or so.
Last year he quadrupled his money in Netflix (NFLX), made approximately 140% on his Herbalife (HLF) stake, and more than doubled it in Federal-Mogul Corporation (FDML) and other smaller plays & had his investment vehicle, Icahn Enterprises, L.P. (IEP), post over 100% returns in 2013.
2014 is off to another great start as Forest Labs (FRX) was acquired yesterday by Actavis (ACT) for some $25B. Mr. Icahn had an 11.4% stake in Forest Labs and the stock has appreciated more than 200% since he first announced his initial stake in 2009 and started agitating for change. Right now, the longtime investor & activist is the closest thing to King Midas that there is in the market.
Not all of Mr. Icahn's investments have been as successful but it is hard to argue against his overall investment success recently. It is also a good time to look at a couple of his investments that have not had the appreciation he has had in his overall portfolio, but look like they are attractive investments that will probably pay off eventually for King Midas.
It is hard to discuss Mr. Icahn's investments that have not yet popped without talking about Apple (AAPL). The giant from Cupertino is now Mr. Icahn's largest investment and he has over a $4B stake. He has been rebuffed in his recent push to get the company to initiate a much larger buyback program. However, it is not in this investor's nature to give up easily and I look for this topic to be revisited in the near future.
That being said, Apple has been no slouch in the stock repurchase department. The company has bought back an incredible ~$40B of its shares since it announced its enhanced repurchase program in the summer of last year. It still has ~$20B left in its current buy back authorization.
Despite all the repurchases as well as a 2.3% dividend yield, Apple's cash flow is such it still is sitting on approximately ~160B in net cash & marketable securities. Investors should look for both an increased dividend payout and a substantial lift in its stock repurchase authorization in 2014.
In addition, the iPhone 6 should have at least one version with the larger screens customers and investors have been advocating for. Add in a possible launch of iTV or iWatch, there should be plenty of buzz and speculation around new products this year. Revenues are growing in the 5% to 7% range annually and the stock sells around 13x this year's earnings without equating for cash, less than the overall market multiple (~15x).
Carl Icahn has been successful in pressuring large oil services concern, Transocean (RIG), to make numerous changes. It agreed to a special $3 a share dividend, reduced its board size to 11 from 14 and some board representation. Unfortunately, this has not boosted the stock price yet due mainly to overall headwinds in most of the offshore sector.
However, the stock has myriad attractive attributes. First and foremost, its regular dividend payout is yielding more than five percent (5.2%) at current levels. In addition, after producing year-over-year earnings gains in the low single digits in FY2013, analysts believe earnings should show a ~25% Y/Y gain in FY2014. The company has a ~$30B order backlog.
The shares are going for under 8.5x forward earnings, a deep discount to the overall market multiple in addition to the company's five year average valuation (10.7). The company has also beaten bottom line expectations five of the last six quarters. S&P has a "Buy" rating and a $61 a share price target on the shares as well. Finally, RIG sells for just under book value and has a five year projected PEG of under 1 (.63).
Mr. Icahn is rolling 7's and 11's on a consistent basis. I am going to continue to bet on the hot shooter.