Tracking Carl Icahn's Portfolio - Q1 2018 Update

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Includes: AFSI, AIG, ARII, CNDT, CVI, CVRR, ENZN, FCX, FMCC, FNMA, HLF, HRI, HTZ, IEP, KDUS, LNG, MTW, NAV, NWL, PYPL, SD, TPCA, VKSC, VLTC, WBT, XRX
by: John Vincent
Summary

Carl Icahn’s 13F portfolio value decreased from $22.66B to $20.12B this quarter.

American International Group and PayPal were dropped while adding Newell Brands.

Icahn Enterprises, Herbalife, and CVR Energy are the three largest positions.

This article is part of a series that provides an ongoing analysis of the changes made to Carl Icahn's 13F portfolio on a quarterly basis. It is based on Icahn's regulatory 13F Form filed on 05/15/2018. Please visit our Tracking Carl Icahn's Portfolio series to get an idea of his investment philosophy and our previous update for the fund's moves during Q4 2017.

This quarter, Icahn's 13F portfolio value decreased ~11% from $22.66B to $20.12B. The number of holdings increased from 17 to 16. The portfolio is very concentrated with the largest five positions accounting for ~80% of the entire holdings: Icahn Enterprises (NYSE:IEP), Herbalife (NYSE:HLF), CVR Energy (NYSE:CVI), Cheniere Energy (NYSEMKT:LNG), and Freeport-McMoran (NYSE:FCX).

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: Icahn's 13F filing is a consolidated report and so should not be viewed as a single portfolio. Specifically, Icahn Enterprises holds several of the businesses and the entities in turn hold Icahn Enterprises. For an idea on the business structure, check-out Icahn Enterprises Investor Presentation (Slide 5).

New Stakes:

Newell Brands (NASDAQ:NWL): NWL is a ~4% of the portfolio position established this quarter at a cost-basis of $27.40 per share. The stock is now below that at $26.32. For investors attempting to follow Icahn, NWL is a good option to consider for further research.

Note 1: Carl Icahn controls ~7% of the outstanding shares of Newell Brands. This includes the 30.3M shares listed in the 13F through direct purchase and another ~3M shares beneficially owned thru forward contracts.

Note 2: In April, rival activist Starboard Value came to an agreement with Carl Icahn whereby they now together control Newell's board.

Stake Disposals:

American International Group (NYSE:AIG): AIG was a minutely small 0.28% portfolio stake as of Q3 2015. It was increased to a top-three position the following quarter at prices between $57 and $64. H1 2016 also saw a minor increase. The stock currently trades at $55.15. The stake was at 11.30% of the portfolio as of last quarter. It was an activist position and Icahn's ownership interest was at ~4%. There was a ~6% selling in Q2 2017 and that was followed with the disposal this quarter at prices between $53 and $65.

PayPal Holdings (NASDAQ:PYPL): PYPL was a 2.60% of the portfolio position. It was established as a result of the spinoff of PayPal Holdings from eBay Inc. (NASDAQ:EBAY) that closed in July 2015. Icahn sold the EBAY stake soon after but held on to the PYPL position. 2016 saw selling in PYPL as well: Q2 and Q3 2016 had seen a combined ~30% reduction at prices between $34 and $40.50. There was a two-thirds reduction in Q2 2017 at prices between $42.50 and $54.50 and that was followed with a ~20% selling last quarter at prices between $64 and $79. The elimination this quarter was at prices between $72 and $85.50. The stock currently trades at $80.79.

Stake Decreases:

Freeport-McMoran Inc.: FCX is a fairly large ~4% of the portfolio stake established in Q3 2015 at prices between $7.50 and $18.50. Q4 2016 saw a ~12% trimming at prices between $9.50 and $16.50. Q3 2017 saw another ~16% selling at prices between $11.89 and $15.55 and that was followed with a one-third reduction this quarter at prices between $17 and $20. The stock currently trades at $16.87.

Xerox Corporation (NYSE:XRX): XRX is a ~3% of the portfolio position established in Q4 2015 at prices between $24 and $32. The stock is now at $28.19. There was a ~5% trimming this quarter.

Note 1: Icahn controls 9.21% of the business. In December, Icahn launched a proxy battle nominating four new board members in an effort to stop the Xerox-Fujifilm (OTCPK:FUJIY) deal announced earlier. Earlier this month, Xerox scrapped the deal with Fujifilm in a settlement with Icahn and Darwin Deason (another activist alongside Icahn).

Note 2: Icahn's activism earned him three board seats in 2016. Xerox spun-off Conduent (NYSE:CNDT) and that transaction closed in January 2017. That was followed with a 1:4 stock-split in June. The prices quoted above are adjusted for these two transactions.

Manitowoc Company (NYSE:MTW): MTW is a very small 0.24% of the portfolio activist stake. It was established in Q4 2014 at prices between $14 and $22 and increased by ~136% in Q1 2015 at prices between $16 and $22. The stock currently trades at $27.09. There was a ~36% selling this quarter at prices between $32.50 and $34.50.

Note: The prices quoted above are adjusted for the Welbilt (NYSE:WBT) spin-off in March 2016 and the 1-for-4 stock-split last November.

Stake Increases:

None.

Kept Steady:

Icahn Enterprises: IEP is a very long-term position that has seen consistent buying over the years. The position size saw increases from ~98M shares to ~102M shares in 2013, to ~109M shares in 2014, to ~117M shares in 2015, to ~130M shares in 2016, and to ~158M shares as of Q4 2017. The stake was kept steady this quarter. The stock currently trades at $68.09.

Note: Regulatory filings since the quarter ended show it owning 162.4M shares (91.2% of the business). This is compared to ~158M shares in the 13F report. The increase happened at an average cost-basis of $60.81.

Herbalife: HLF is a large (top three) ~11% of the 13F portfolio stake first purchased in Q1 2013 in the high-teens price range. Q3 2016 saw a ~15% increase at prices between $29 and $34 and that was followed with a similar increase the following quarter at prices between $24 and $32. The stock currently trades at $53.70.

Note 1: Icahn controls ~25% of the business. On March 1, 2018, Icahn disclosed that his profit on HLF was ~$1B. The stock was trading at ~$46 at the time.

Note 2: The prices quoted above are adjusted for the 2-for-1 stock-split last week.

CVR Energy Inc.: CVI is a large (top tree) ~11% of the 13F portfolio position first purchased in Q4 2011. The bulk of the current position (71.2M shares: 82% of the whole business) was purchased through a $30 per share tender offer in H1 2012. The stock currently trades at $44.77.

Note 1: Two MLPs were carved out since the 2012 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. In August 2015, CVR Partners agreed to merge with Rentech Nitrogen.

Note 2: Icahn disclosed that CVI stock including dividends was up ~62% as of EOY2016 from the tender offer at $30. CVI stock was trading at $25.39 at the time. So, his adjusted cost-basis was $15.67 as of that date.

Cheniere Energy: LNG is a large (top five) ~9% portfolio position. The bulk of it was purchased in Q3 2015 at prices between $47.50 and $70.50. Q4 2015 saw a ~15% increase at prices between $36 and $54. The stock currently trades at $62.76.

Note: Icahn's ownership stake in the business is ~14%.

Navistar International (NYSE:NAV): NAV is a ~3% of the 13F portfolio long-term position. The last significant activity follow: ~22% increase in Q2 and Q3 2014 at prices between $29 and $38. The stock currently trades at $40.15. There was a very minor ~3% increase in Q1 2017 at ~$25.70.

Note: Icahn controls ~17% of the business.

Hertz Global Holdings (NYSE:HTZ): HTZ is a ~3% of the portfolio position. It was established in Q3 2014 at a cost-basis of ~$105. In Q4 2014, the stake was increased by just over one-third at prices between $72 and $95. Q4 2015 saw another ~23% increase at prices between $51 and $74. Q4 2016 saw another ~125% increase at prices between $21 and $40. The stock currently trades at $16.21. For investors attempting to follow Icahn, HTZ is a good option to consider for further research.

Note 1: Icahn controls ~35% of the business. The total outlay so far is ~$1.85B and the market value is ~$580M.

Note 2: The prices quoted above are adjusted for the Herc Holdings (NYSE:HRI) spinoff in Q2 2016.

American Railcar Industries (NASDAQ:ARII): ARII is a long-term ~2% of the portfolio position held steady this quarter. Icahn owns ~62% of ARII.

Conduent Inc.: The stake came about as a result of Conduent's spinoff from Xerox that closed in January last year. Terms called for Xerox shareholders to receive Conduent shares in the ratio 1:5. The current CNDT stake is consistent with this ratio: Icahn owned 99M shares of Xerox for which he received 19.8M shares of Conduent. CNDT started trading at ~$15 and currently goes for $19.37.

Herc Holdings: HRI is a very small 1.45% of the portfolio position established in Q2 2016 as a result of the spinoff of Herc Holdings from Hertz Global Holdings. There was a ~4% stake increase in Q3 2017 at ~$38.50. The stock started trading at ~$33 and currently goes for $58.74.

Note: Icahn controls ~16% of the business.

Welbilt Inc., previously Manitowoc Food Service: The very small ~1% of the portfolio WBT stake was established as a result of the spin-off from Manitowoc. The spin-off terms called for one share of WBT for each share of MTW held. Icahn held 10.58M shares of MTW for which he received the same number of WBT shares. Regular-way trading started in early March 2016 with WBT at $13.41. It currently trades at $19.57 compared to Icahn's cost-basis of ~$15. There was a ~5% trimming last quarter.

Note: Icahn controls ~7% of the business.

CVR Refining LP: CVRR is a minutely small 0.42% of the 13F 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 at $21.90.

SandRidge Energy (NYSE:SD): SD is a 0.45% of the portfolio activist stake established last quarter at prices between $16 and $21 and the stock is now below that range at $14.95.

Note: Icahn has a 13.51% ownership stake in the business. He lobbied the board and succeeded in ending the Bonanza Creek acquisition on December 28, 2017. Last month, he nominated a slate of five directors to replace the entire board.

Note 1: Icahn also owns significant stakes in the following OTC stocks as per latest regulatory filings: ~15% of Enzon Pharmaceuticals (NASDAQ:ENZN), ~79% of Viskase Companies (OTCPK:VKSC), and ~53% of Voltari Corp. (OTC:VLTC). He is also known to have a position in Fannie/Freddie (OTCQB:FNMA) (OTCQB:FMCC).

Note 2: In January, majority owned (~68%) Cadus Corporation (OTCQB:KDUS) agreed to an acquisition by an affiliate of Icahn for $1.61 per share. Last month, Icahn entered into an agreement to sell majority owned Tropicana Entertainment's (OTCQB:TPCA) real-estate assets to Gaming & Leisure Properties (NASDAQ:GLPI) and gaming & hotel operations to Eldorado Resorts (NASDAQ:ERI).

Note 3: A regulatory 13D filing last week disclosed Icahn beneficially owning 18.4M shares (~9.4% of the business) of AmTrust Financial Services (NASDAQ:AFSI). 6.93M shares were purchased directly at a cost-basis of ~$13 per share ($90.3M outlay) and the rest in forward contracts. The filing also disclosed Icahn's opposition to the going-private transaction by the Zyskind/Karfunkel families for $13.50 per share. AFSI currently trades at $13.76.

The spreadsheet below highlights changes to Icahn's US stock holdings in Q1 2018:

Carl Icahn - Q1 2018 13F Report

Disclosure: I am/we are long LNG, AIG. 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.

Additional disclosure: I am long Fannie/Freddie pfds.

Editor's Note: This article covers one or more microcap stocks. Please be aware of the risks associated with these stocks.