Every quarter, many money managers have to disclose what they've bought and sold via 13F filings. Their latest moves can shine a bright light on smart stock picks.
Today, let's look at investing giant Carl Icahn, who has made billions partly by taking large positions in companies and pushing for change in them.
These companies have included Texaco, RJR Nabisco, and Imclone. He's also drawn to companies in or near bankruptcy, wanting to make them more valuable in order to sell them at a higher price.
Icahn's reportable stock portfolio totaled nearly $28 billion in value as of September 30, 2015. Its top two holdings, Icahn Enterprises L.P. and Apple, made up 48% of the overall portfolio's value.
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Icahn's stake in Apple was worth close to $6 billion, but that doesn't even constitute 1% of Apple's value. Nevertheless, he has agitated for an increase in share buybacks -- and the company did boost its capital return plans to $200 billion, including both dividends and stock buybacks.
Interesting developments
So, what does Icahn Associates' latest quarterly 13F filing tell us? Here are a few interesting details: The portfolio sold all of its eBay Inc shares and lists PayPal Holdings Inc as a new -- and major -- holding, its fourth largest.
Recall that eBay separated from PayPal earlier this year -- as Icahn had encouraged it to do -- with the faster-growing electronic payments specialist now standing on its own and not as a part of the major e-commerce platform. Icahn has suggested that PayPal buy or merge with another payment specialist to strengthen its position. Meanwhile, PayPal remains attractive, with annual free cash flow topping $1.7 billion and net margins near 13%.
Icahn also bought a lot more of Cheniere Energy, boosting its holding by 2,555% and leaving the liquefied natural gas (LNG) company as the portfolio's fifth-largest position. Indeed, as of the end of the quarter, he owned about 12% of it and has positioned two of his people on the board of directors.
There's plenty to worry about with Cheniere, as its financial statements show years of negative free cash flow, negative operating cash flow, and net losses -- and many worry about a glut of LNG making profitability difficult. Critics frown at the company's CEO compensation, too, which topped $140 million in 2013. (Jim Chanos, of Kynikos Associates, shorted the stock.)
On the other hand, though, things could work out well in the long run, as Cheniere is a leader in LNG, and the price of oil isn't likely to stay low forever.
Other new holdings include Freeport-McMoRan, American International Group Inc, and CVR Refining LP. Freeport McMoRan has been struggling recently, in part because of falling prices for oil and copper. It has also taken on a lot of debt, partly due to its purchase of McMoRan Exploration Co. and Plains Exploration for $20 billion. Its lavishly compensated CEO has come under a lot of fire, but letting him go would be costly. Icahn recently accumulated more than 8% of the company.
Finally Icahn sold out of his position in Hologic, a specialist in mammography and diagnostics. The company has been posting double-digit revenue growth, but it's not exactly a bargain at recent prices.
We should never blindly copy any investor's moves, no matter how talented the investor. But it can be useful to keep an eye on what smart folks are doing, and 13-F forms can be great places to find intriguing candidates for our portfolios.
