This article is part of a series that provides an ongoing analysis of the changes made to Carl Icahn's US stock portfolio on a quarterly basis. It is based on Icahn's regulatory 13F Form filed on 08/14/2014. Please visit our Tracking Carl Icahn's Portfolio series to get an idea of his investment philosophy and our previous update highlighting the fund's moves during Q1 2014.
This quarter, Icahn's US long portfolio went down marginally from $32.93B to $32.53B. The portfolio increased 8%, 24% and 14.50% respectively in the previous three quarters. The number of holdings in the portfolio remained steady at 19: the huge 8.59% position in Forest Labs was eliminated and a new position in Gannett was added. The largest holding is Icahn Enterprises with an allocation of 32.44% of the US long portfolio. It is followed by Apple Inc. with an allocation of 15.07%. It is a very concentrated portfolio with the largest five positions accounting for almost 72% 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."
NOTE: the listed value of the portfolio in the 13F appears to be incorrect as the quoted value of his HOLX holding is off by a decimal point. The value reported above was adjusted so that the HOLX value is consistent with the share count listed in the 13F. A similar adjustment was made in the quoted values for HOLX in the section below and the spreadsheet.
Forest Labs (NYSE:FRX): FRX was an 8.59% of the US long portfolio activist stake first purchased in Q2 2011 at prices between $32.50 and $40. Over the years, the position was increased by around 10%. Icahn engaged in two proxy battles and prepared for a third in 2012. A deal with the company in June 2013 resulted in an Icahn representative being appointed to the company's board as the eleventh member. The CEO was replaced in October 2013 and in December the company announced an accelerated repurchase program to be funded with a $1B debt offering and also announced plans to cut $500M in costs by 2016. Icahn held 11.5% of the outstanding shares of FRX as of last quarter. On 2/18/2014, Actavis plc (ACT) agreed to buy FRX in a $25B cash-and-stock deal ($26.04 cash and 0.3306 ACT shares for each FRX common stock held). The acquisition closed on July 1, 2014 and the shares last traded at around $100. Icahn harvested large long-term gains from this position.
Gannett Inc. (NYSE:GCI): GCI is a small 0.26% (2.7M shares) of the US long portfolio position established this quarter. On August 14, 2014, Icahn filed a 13D regulatory filing showing he controlled 6.6% (~15M shares) of the business. 12.2M of the shares are a synthetic long stake (long calls and short puts) while the rest are a direct long position. The shares purchased have an average cost-basis of around $30. The stock currently trades at $34.41.
Netflix Inc. (NASDAQ:NFLX): NFLX is a 2.39% of the US 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. Q4 2013 saw an about-turn as more than half the position was disposed of at prices between $304 and $342. The pattern continued last quarter as the position was reduced by another ~16% at prices between $328 and $455. This quarter saw an additional ~21% reduction at prices between $314 and $449. The stock currently trades at around $466. Icahn is harvesting large long-term gains from the position. It was an activist stake and NFLX adopted a poison-pill provision to defend itself. Icahn backed-off as the company also started posting strong financial results.
eBay Inc. (NASDAQ:EBAY): EBAY is a 4.74% of the US long portfolio position (~2.5% of the business) established last quarter at prices between $51 and $59. The position was increased by ~11% this quarter at prices between $48 and $56. The stock currently trades at $53.11. The initial stake was first disclosed in eBay's FY 2013 earnings release when it was also revealed that Carl Icahn proposed spinning off Paypal and had nominated two board members. On 4/10/2014, an agreement was reached that prevented an immediate proxy fight.
Icahn Enterprises (NASDAQ:IEP): IEP is a very long-term position that has seen consistent buying over the years. Last year, the position size increased from ~98M shares to ~102M shares and currently the share count is at ~106M. The last big stake increase happened in 2012 when around 20M shares were purchased at prices between $36.50 and $42.50. The stock currently trades at around $108.
Navistar International (NYSE:NAV): NAV is a relatively small 1.65% of the US long portfolio position that was increased by ~12% in Q3 2013 at prices between $27.50 and $40. This quarter saw an ~8% increase at prices between $31.93 and $38.35. The stock currently trades at $37.77. Icahn controls around 18% of the business.
Apple Inc. (NASDAQ:AAPL): The original stake in AAPL was established in mid-August last year at around $68 per share. It was increased by ~22% in Q4 2013. Last quarter, another 2.8M shares (pre-split share count: ~60% stake increase) of AAPL stock was purchased at prices between $57 and $80. The stock currently trades at $99. Apple is now the second largest position in the portfolio at 15.07%. Icahn had pushed Apple to do a $50B buyback but in February the call was abandoned - the campaign was partly successful as Apple is buying back more shares.
CVR Energy Inc. (NYSE:CVI): CVI is a huge 10.55% of the US 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 $48: it has been a roller-coaster ride with the stock reaching as high as $72.32 in May 2013 and a low of $33.62 in Nov 2013. The stock has returned ~14% for the year so far.
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.
CVR Refining LP : CVRR is a small 0.46% of the US 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% in Q2 2013 at prices between $28 and $35. The stock currently trades below that range at $24.27.
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 $25.46. 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% in Q3 2013. He currently owns around 10% of Chesapeake (66.5M shares).
Note: The implied performance of this stake by the prices quoted above is negatively skewed because of the spinoff of Seventy Seven Energy (NYSE:SSE), its Oilfield Services business unit. The terms of the deal called for CHK shareholders to receive one share of SSE for every 14 shares of CHK held.
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. In Q3 2013, 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 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 as the stock currently trades at around $16.37. Icahn now controls just over 80% of the business. It is Icahn's fourth-largest position at 7.53% of the US long portfolio.
Herbalife (NYSE:HLF): HLF is a 3.37% of the US long portfolio stake first purchased in Q1 2013 in the high-30s price range. The position was marginally increased in Q2 2013 to almost 17M shares. Last quarter saw a very minor stake increase. The stock currently trades at around $51.03. Bill Ackman is on the other side of this trade - short 20M shares since Q4 2012. Bill Ackman and Carl Icahn ended their feud in May and they have agreed to disagree on HLF. HLF stock experienced a drop below $50 in March after disclosing that they are being investigated by the FTC (Civil Investigative Demand - CID).
Hologic Incorporated (NASDAQ:HOLX): HOLX is a 2.66% of the US long portfolio activist stake established in Q4 2013 at around $21 per share. Icahn currently has a 12.5% stake in the business and have nominated two representatives to the board. In early December, a new CEO (Stephen MacMillan formerly of Stryker) was appointed stemming hopes that Icahn might immediately push for the sale of the business. The stock currently trades at $25.42.
Nuance Communications (NASDAQ:NUAN): NUAN is a 3.51% of the US long portfolio stake established in Q1 2013 at prices between $18 and $25. The position was increased by roughly two-thirds in Q3 2013 at prices between $18.31 and $20. The stock currently trades below the low end of those ranges at $16.86. Icahn's ownership is currently at over 17% of the company (~60M 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.
Talisman Energy (NYSE:TLM): TLM was a new 0.30% of the US long portfolio position established in Q3 2013. In Q4 2013, the stake was increased by over ten-times to a 2.91% of the US long portfolio position at an average cost-basis of around $11.79. The stock currently trades below that price range at $10.35. Icahn has succeeded in nominating two new board members.
Transocean Ltd. (NYSE:RIG): RIG is a small ~2.97% of the US 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 below those ranges at around $39.25.
Voltari Corporation (NASDAQ:VLTC), American Railcar Inds. (NASDAQ:ARII), Enzon Pharmaceuticals (NASDAQ:ENZN), and Mentor Graphics (NASDAQ:MENT): These are relatively small (less than 2% of the US 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%, and 14.2% of VLTC, ARII, ENZN, and MENT respectively.
The spreadsheet below highlights changes to Icahn's US stock holdings in Q2 2014:
Disclosure: The author is long NUAN.
The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.
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