We continue to look for stock ideas and stand on the shoulders of giants. Lisa Springer from Street Authority picks up four stock in which Carl Icahn has interest and poses the question as to whether we should follow suit. Carl Icahn is a household name with a net worth estimated to exceed $13 billion. If Icahn is interested in a company, it might be worth investigating further.
The four of interest are:
- CVR Energy (CVI) -- Initiated position. CVR owns refineries in the Midcontinent United States,
- Navistar International Corp. (NAV) -- Increased position, Navistar is a military truck and RV manufacturer
- El Paso Corp. (EP) -- Increased position, El Paso is a natural-gas pipeline operator
- WebMD HealthCorp. (WBMD) -- Increased position. WebMD is a leading healthcare portal
This is a diverse mix of companies and worth measuring against our ETF benchmark of a balanced portfolio of Dividend producing ETFs to see how the historical returns compare. This provides a contrast between the blanket coverage of an ETF portfolio and one who picks a stock based on one's belief in the company.
|Asset||Fund in this portfolio|
|REAL ESTATE||ICF (iShares Cohen & Steers Realty Majors)|
|FIXED INCOME||TIP (iShares Barclays TIPS Bond)|
|Emerging Market||VWO (Vanguard Emerging Markets Stock ETF)|
|US EQUITY||DVY (iShares Dow Jones Select Dividend Index)|
|US EQUITY||VIG (Vanguard Dividend Appreciation ETF)|
|INTERNATIONAL EQUITY||IDV (iShares Dow Jones Intl Select Div Idx)|
|High Yield Bond||HYG (iShares iBoxx $ High Yield Corporate Bd)|
|INTERNATIONAL BONDS||EMB (iShares JPMorgan USD Emerg Markets Bond)|
- Carl Icahn Loves These 4 Stocks -- Should you Buy Too-- Total of $10K invested equally in each stock
- Retirement Income ETFs Tactical Asset Allocation Moderate -- Above funds using TAA (40% fixed income, 30% for each of the top two asset classes)
- Retirement Income ETFs Strategic Asset Allocation Moderate -- Above funds using SAA (40% fixed income, 12% for each of the five asset classes -- funds selected based on price momentum)
Portfolio Performance Comparison
|1Yr AR||1Yr Sharpe||3Yr AR||3Yr Sharpe||5Yr AR||5Yr Sharpe|
|Retirement Income ETFs Tactical Asset Allocation Moderate||1%||1%||21%||10%||77%||8%||54%|
|Retirement Income ETFs Strategic Asset Allocation Moderate||5%||3%||24%||20%||118%||3%||8%|
|Carl Icahn Loves These 4 Stocks -- Should you Buy Too||8%||2%||6%||39%||124%|
As I read the table, I find that the very recent returns have been good but the one-year returns have not in absolute and risk adjusted terms. However, as we track back further, we see better returns. It's unfortunate that there isn't more history, but this is intriguing.
As I look down at the charts, the last three months have been good but the one-year chart is very ugly. There is a lot of volatility although at least the returns aren't negative.
Three-Month Chart One-Year Chart Three-Year Chart Five-Year Chart
As I look at the five-year chart, I wonder if this might not be a good target for Icahn. The businesses were hammered in 2009 and are making their way back up. I have invested in NAV but I am not willing to do any more just yet but to see how it plays out for a while.
Additional disclosure: MyPlanIQ does not have any business relationship with the company or companies mentioned in this article. It does not set up their retirement plans. The performance data of portfolios mentioned above are obtained through historical simulation and are hypothetical.