The financial world has long been familiar with the name Carl Icahn. A titan in the investment realm, he built his legacy as a corporate raider in the 1980s before transitioning into a more genteel role as a shareholder activist. His modus operandi? Snapping up substantial stakes in undervalued companies and leveraging his newfound influence to instigate pivotal changes, often by securing seats on their boards of directors.
Most recently, Icahn made waves by securing a spot on the board of JetBlue Airways (NASDAQ:JBLU) within days of revealing a massive 10% holding in the airline. Simultaneously, he orchestrated a similar maneuver with Illumina (NASDAQ:ILMN), utilizing one of his portfolio managers to legally challenge the biotech company’s board members for breaching their fiduciary duties.
At the heart of Icahn’s expansive empire lies Icahn Enterprises (NYSE:IEP), a robust master limited partnership (MLP) boasting a substantial $16 billion in assets. This conglomerate spans diverse sectors, including investments, automotive, food packaging, real estate, home fashion, and pharmaceuticals.
The web of assets and liabilities is predominantly held by Icahn Enterprises Holdings, the entity responsible for steering IEP’s operational activities. To sidestep classification as an investment company, the partnership strictly caps its investment in securities at 40% of its total asset allocation.
To cast light on his investment philosophy, Icahn likens his approach to the ethos of legendary investors Benjamin Graham and David Dodd. Drawing inspiration from their playbook, he scours the market for undervalued enterprises with deeply discounted shares. However, unlike his predecessors who typically adopted a buy-and-hold stance, Icahn opts for a more hands-on strategy, actively engaging with the companies he targets. The upshot, according to him, has been a treasure trove of robust returns for his steadfast followers.
Perusing through Icahn’s investment trove reveals a trio of stocks that stand as the linchpins of his investment portfolio, constituting a hefty 82.8% of the pie.
Icahn Enterprises (IEP)
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Leading the pack is Icahn Enterprises (NASDAQ: IEP), holding court as the dominant asset within the plethora of holdings. Icahn’s stake in IEP accounts for a sizeable 57.9% of the entire portfolio value, clocking in at a cool $6.3 billion. With a mammoth 367.9 million shares under his belt, he commands an 86% ownership of the company.
Yet, the plot thickens as IEP’s trajectory reveals a rocky road to prosperity. While 2024 has seen shares stagnate, the past year tells a different story, witnessing a 65% downturn, with a staggering 85% erosion over the last decade. These figures paint a grim contrast to Icahn’s touted returns, beckoning short-sellers to boldly challenge his investment acumen.
The tone took a darker turn last year when Hindenburg Research unleashed a scathing exposé on Icahn Enterprises, unearthing allegations of gross overvaluation in Icahn’s asset estimation. The report viciously accused IEP of leaning on a “Ponzi-like” structure to sustain dividend payments, disproportionately benefiting Icahn himself. The fallout was immediate, with IEP stock plummeting 20%, a blow from which it has yet to fully recover.
Such a turn of events represents a paradigm shift for the illustrious investor, often found on the offensive against corporate hierarchies. Alas, the writing on the wall suggests that IEP stock may not be the golden ticket most investors are seeking.
CVR Energy (CVI)
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Within the realm of Icahn Enterprises’ energy domain resides CVR Energy (NYSE:CVI), an entity that captured Icahn’s intrigue back in 2012. This versatile energy player boasts a revenue stream drawn from a trifecta of renewable fuels, petroleum refining, and nitrogen-fertilizer production. The refining arm operates under CVR Refining, strategically stationed near the heart of Cushing, OK, while the fertilizer manufacturing takes root under CVR Partners (NYSE:UAN), with facilities sprawled across the southern plains and Corn Belt.
CVR emerges as a beacon of hope within Icahn’s portfolio, with shares shining brightly in 2024, marking an 18% upswing, and a commendable 36% surge over the past year. Though showing a 12% dip over the decade, the company has not shied away from rewarding its stakeholders. Last year, they dished out a standard dividend of $2.00 per share along with two special dividends totaling $4.50 per share, a gesture attributed to the company’s stellar operational performance. While CVR’s regular dividends have demonstrated volatility in the past, its overall trajectory appears promising.
Shouldering an impressive 18.5% stake in CVI stock, Icahn commands 66.7 million shares valued at $2 billion in this energy gem.
Southwest Gas (SWX)
The Rise of Southwest Gas Holdings in Carl Icahn’s Portfolio
Powering the Natural Gas Industry
Southwest Gas (NYSE: SWX) is more than just another cog in the wheel of the natural gas industry. Acting as the intermediary, it handles the crucial roles of purchasing, distributing, and transporting natural gas throughout North America. Moreover, the company dons yet another hat by providing infrastructure services, collaborating with regulated utilities to establish and uphold the energy grid in the United States and Canada.
A Stock Unconventionally Placed but Excelling Nonetheless
In Carl Icahn’s extensive investment repertoire, Southwest Gas stands as the third-largest position. An interesting choice, given its placement in the investment, not energy segment. Despite this, the stock has been defying odds by showcasing a staggering 12% surge this year, with an 18% uptick over the past 12 months. Impressively, it has chalked up over a 33% rise in the last decade, albeit falling short of the S&P 500 returns.
The Carl Icahn Factor
With a substantial holding of 11.2 million SWX shares valued at a remarkable $698 million, Icahn’s 6.4% stake in Southwest Gas makes it the cornerstone of his investment empire. Notably, this stake equates to a sizable 15.2% ownership in the natural gas entity. The association deepens as IEP’s President and CEO, Andrew Teno, assumes the role of director on Southwest’s board since 2022. For investors aiming to mimic Icahn’s strategy, Southwest Gas emerges as a prime starting point.
