Carl Icahn, one of the first activist investors is regarded as one of the most successful hedge fund managers of all time. He founded Icahn Enterprises in 1987 which focused on making changes from inside the companies. During the 80s he was called a corporate rider after an episode of hostile takeover and profiting from Trans World Airlines. Carl Icahn’s portfolio is currently valued at $10.7 billion
Carl Icahn currently has 14 holdings in his portfolio, with a focus on the finance sector. His biggest holding is a stake at his hedge fund Icahn Enterprise which is currently sustaining major losses. Besides finance, he holds large stakes in utility and energy-focused companies.
In mid 2023 Hindenburg Research released an analysis of Icahn Enterprises. They concluded that the price value of their stocks is over-valued, and accused Carl Icahn of running a Ponzi-like economic structure. For more about his investment portfolio and approach stay with us.
Carl Icahn Portfolio Holdings
Carl Icahn holds a concentrated portfolio of often actively managed companies by employing an activist approach. His current portfolio consists of 14 holdings valued at $10.7 billion.
- Icahn Enterprises (NASDAQ:IEP) with 61% of the portfolio
A holding company controlled by Carl Icahn is used to diversify its portfolio by investing in energy, automotive, metals, real estate, home fashion, and food packaging industries. Icahn holds 368 million shares out of the total 394 million shares which is about 94% of all outstanding shares.
This is both the biggest holding and the biggest loser in Icahn’s portfolio. The estimated purchase price was valued at $18.7 billion while the current value is near $6.57 billion, resulting in a loss of 65%.
From their peak value of $110.17 back in Q1 2014, their value is constantly dropping. They ended the 2022 estimated at $50.65 and went through a major downturn in 2023 ending it with $17.19.
- CVR Energy (NYSE:CVI) with 18.66% of the portfolio
Icahn started trading CVR Energy stocks back in Q$ 2011 when he bought 3.83 million shares valued at $21.42. He continued to increase his stakes in the company, raising about 71 million shares.
He didn’t make a sale until Q3 2023 and during the year he sold 4.4 million shares. His total investment into this holding was $1.96 billion and its current value is at a reported $2.01 billion netting him a gain of 2.6%. He is currently the biggest stakeholder in this company with 65.95% of all outstanding stocks.
- Southwest Gas Holdings Inc (NYSE:SWX) with 6.24% of the portfolio
Icahn invested in this American natural gas supplier in Q3 2021 when he bought 1.27 million shares. He continued investing and holding shares, raising his stake to 11 million shares. Icahn currently owns 15.18% of all companies’ outstanding stocks. While he invested $782 million, the total value of his share is now $670 million resulting in a loss of 14%.
- FirstEnergy Corp (NYSE:FE) with 5% of the portfolio
Icahn’s first investment into FirstEnergy was in Q1 2021 when he invested $460 million into 19 million shares. He didn’t conduct any trades until Q2 2023 when he sold 4.88 million shares. Until now this investment brought him a gain of 14%.
- Bausch Health Companies (NYSE:BHC) with 2.6% of the portfolio
This multinational pharmaceutical company formerly known as Valeant Pharmaceuticals International is the 5th biggest holding in Icahn’s portfolio. When he first bought shares in Q4 2020 their value was $18.65. He increased his stake in Q1 2021 when their value rose to $29.33. Today he owns a total of 34.7 million shares which translates into 9.33% of all outstanding stocks.
The value of stocks in that period experienced a significant drop. His total investment was $963 million, and the current value of his stake is $283 million, resulting in a loss of 71%.
- Dana Inc. (NYSE:DAN) with 1.7% of the portfolio
Dana Inc. manufacturer of automotive components is the 6th largest holding in the Icahn portfolio. Between Q4 2020 and Q3 2021, he bought shares on three occasions and he currently owns 14.3 million shares. He is a major holder with 9.51% of all outstanding shares. Icahn spent $303 million in this holding, while the current value of the shares is estimated at $184 million, resulting in a loss of 39%.
- Conduent Inc. (NASDAQ:CNDT) with 1.23% of the portfolio
Conduent Inc. a business service provider has been a part of Icahn’s portfolio from Q1 2017. He bought 38.1 million shares in 7 trades between Q1 2017 and Q3 2019. He owns 17.31% of the company’s outstanding stocks, and he still didn’t sell any shares. His total investment in this company is valued at $448 million, while the current value of his stake is $132 million. The loss of this investment is at 70%.
Carl Icahn’s Background
Carl Icahn was born in Brooklyn to Jewish parents. He finished Princeton University with a degree in philosophy. He entered New York University intending to finish medical school. He dropped out in his second year and decided to enlist in the army.
Icahn joined Dreyfus and Co. in 1961 as a stockbroker. Later in that year, an almost 10-year-long bullish phase of the market ended. It was followed by a major market collapse, during which Icahn learned how to navigate the difficult times and come on top.
His experience and understanding of the market flourished, and in 1963 he joined Tessel, Patrick, & Co. as a financial options manager. His talent continued to show and just a year later he was called into Gruntal & Co. where he ran the options department.
During this time he gathered experience in both convincing people and handling financial instruments. That helped him later when he asked a relative to help him out with a $400.000 loan to start Icahn & Co. He concentrated on risk arbitrage and financial options.
He specialized in acquisition arbitrage. This meant that he made bets on shares of troubled companies intending to gain a majority stake. Then he would take over the company and sell its assets part by part for maximized profits.
During the 80s he became famous for his keen eye for troubled companies with potential. He didn’t focus on any specific sector but rather overlooked the whole market for potential acquisition targets.
Take A Look At Carl Icahn : Philosophy on Investing:
Icahn Capital Management
When talking about Icahn Capital Management (ICM) it is important to note that it serves a different purpose than the Icahn Enterprises L.P. While the latter is a publicly traded diversified holding company, ICM serves as a hedge fund actively managed by Icahn.
Through ICM Icahn is managing his wealth and conducting investments in publicly traded companies. Unlike Icahn Enterprises it is less transparent, and finding information about their current affairs is trickier.
Through ICM Icahn invests in companies from diverse sectors. He has preferred sectors that he is acquainted with, like energy, automotive, financial services, and consumer goods. He sees these industries as those that will always have a growth potential because they are essential.
Icahn utilizes his highly variable approach that combines contrarian, value-investing, and activist strategies. But, unlike other funds he manages, he is searching for large-cap companies that are currently undervalued. He aims for well-established companies that are going through a tough patch, but have the essentials needed for successful operations.
He often adopts a contrarian approach and moves into companies that are discarded by others. Once he finds the right investment opportunities his goal is to acquire a major stake in the company. Once he achieves it he can start making changes from the inside. He assesses the conditions even further identifying the best approach to move things upwards.
Investment Philosophy
Carl Icahn’s investment philosophy shares similarities with Warren Buffett’s. He is looking for companies that have stocks with low value but with underlying potential for better results. He often says that he invests in companies that nobody wants to.
Unlike most investment strategies, this value investing approach demands the investor to perceive buying stocks as investing in the business. There is no room for short-selling and other types of price manipulations, he aims to make the best out of the companies no one believes in. That takes time, knowledge, and patience.
Before he makes an investment Icahn conducts a deep analysis to understand what he is dealing with. He checks the financial condition of the company, its cash flow, competitive landscape, and tries to find any competitive advantage.
He lets his analysts look over quarterly and annual earnings and stock predictions while he focuses on uncovering often disregarded parts of the business. From this, we can see that he is not only a value investor but that he also employs a contrarian investing philosophy.
Although he and Buffett are both value investors at heart, they have one key difference. When Buffett buys stocks he intends to hold them for very long periods, often indefinitely. On the other hand, Icahn holds the stocks but sells them when the value of stocks increases, and when the market figures the true value of the company.
Ichan tends to buy stocks in companies that are underperforming while he can buy stocks for a lower price than the net asset value of the company. His train of thought is that the management is not able to maximize the assets’ value, so buying them can help achieve its full potential.
A part of his diverse investment approach is also activism. He often buys large stakes at companies to make changes. If he detects the management is not delivering results he is not shy in expressing his opinion and eventually replacing the team.
To accomplish this he often resolves to proxy fights, public campaigns, or boardroom negotiations. He is willing to go the extra mile to achieve his goals whether those are to replace the management, cut expenses, or conduct assets divestitures.
If he couldn’t get his way he often resorted to a practice called greenmailing. He would threaten the board that he would gain a majority stake in the company. After that, he would go for the tender offer to sell his share back. The asking price for those stocks would be significantly higher than the value he paid them. If that didn’t work he would offer his stake to other companies.
This was soon identified as blackmail, and after several situations when Icahn managed to pull it off, it was outlawed.
When assessing Icahn’s approach there are some other key points to look out for, like that his approach tends to be risky. Going against the market sentiment and investing in a low-valued company can get messy with major losses.
Getting the company back from the bottom can take years, and the investor must be patient and ready to wait for the company out. These investments are long-term and they can go both ways.
Carl Icahn Portfolio Performance
Investment Successes
Carl Icahn has several success stories, some of them being from the beginning of his career, while there are still several recent accomplishments worthy of note. We will go through the most inspiring and biggest investment hits ranging throughout Icahn’s whole career.
Tappan Company (1979)
During the late 70s, Icahn started implementing his activities investment model where he purchased large stakes in companies to make them profitable. In 1979 he invested $1.8 million into an appliance manufacturer from Ohio – Tappan.
He entered into a proxy fight with the board. He knew that the value of the company was higher and he pushed the sale of the company to appliance manufacturer giant Electrolux. The board was reluctant to do it, but Icahn acquired a controlling stake in the company and forced the sale. The Tappan Company was sold for $2.8 million, doubling his investment.
TWA (1985)
This often-discussed investment was deemed controversial from the beginning. TWA, once an airline giant and innovator, was in financial problems for years. They didn’t have enough planes, and they were in severe debts
In 1985 Carl Icahn came as a presumed savior buying more than 20% of the airline stock. The board and the employees knew his reputation as an investor who often breaks companies apart just to make a profit. But, once Icahn came to the company, he said something that everybody wanted to hear – he wanted to make TWA profitable.
The first major action that Icahn took was to buy Ozark Airlines in 1986. By doing so he cemented the TWA’s dominance in the St. Louis hub. But soon after it became obvious that Icahn’s crucial goal is to take everything noteworthy from TWA and make gains from it.
In 1988 Icahn took TWA private and made a profit of $469 million, but the TWA only got $540 million in debt. The next crucial move made by Icahn happened in 1991 when he sold all TWA London routes to American Airlines for $445 million.
A year later TWA filed for bankruptcy, but they emerged in 1993 with 55% of shares owned by the creditors. Icahn demanded to be repaid and his share was $190. The company didn’t have that kind of money so they made a deal with him to sell tickets for flights going through St. Louis at a discount.
That ended up with a hole in their budget estimated at $100 million a year. When they saw what the consequences were, they didn’t have another option to go with the deal. They didn’t have the $190 million to pay Icahn, so TWA had a couple more years to struggle for existence.
Although this cannot be seen as a starting success story, Icahn’s profits were several times higher than his initial investment due to several ethical issues. This is one of his typical investment stories when he goes all out in search of profit, no matter the cost. But, this wasn’t his only approach throughout his career.
Netflix (2012)
In mid 2012 Icahn acquired about 10% of Netflix which was in the middle of a rough patch. Investors were losing confidence and they assumed that the company didn’t have a growth potential. Then Netflix stocks were valued at $58. Icahn in two trades acquired almost 5.5 million shares.
Just a year later Icahn sold about half of his shares for $341 per share. A few months later the price of stocks rose to $684 which is 12 times more when he invested. He then sold the majority of his Netflix holdings for a return of 457%. The smaller part of the holding he kept and continued selling it at an even higher price.
He thanked his son Brett Ichan, a portfolio manager at the firm for the discovery of the investment opportunity. This was the single biggest investment success Carl Icahn had in the last two decades.
Investment Challenges
Although Icahn had an overall successful investment career, it was filled with minor and major setbacks. His unique and often controversial activist approach brought him a lot of scrutiny and criticism.
His often stubborn belief in companies resulting in contrarian and high-conviction bets can often go either way. In case he misses, his major stake will end up as a big loss. Investing big in a small number of companies in concentrated sectors can lead to downturns when market volatility takes its toll.
Some of the recent examples were his acquisitions of Dell and Apple. For example, he invested a large portion of his capital into Apple and he bought a solid chunk of their stake. The value of stocks did rise, but the market was unsure at the moment and he decided to avoid risks. Due to his premature sale, his losses were estimated at $3.6 billion.
At the beginning of his career, he often resorted to making controversial investment decisions that were considered as blackmailing of the companies. Due to his reputation, he was called a corporate raider. This investment practice mostly as a result of Icahn’s actions was banned. He after that reverted to a more conventional activist strategy, which was still under scrutiny due to sometimes unethical actions.
A recent trend that focuses on environmental, social, and governance (ESG) factors when conducting investments often doesn’t align with Icahn’s traditional approach. Since these factors are gaining in both popularity and importance, it will be necessary for Icahn to find a way to adapt his investment approach to these trends.
Throughout his career, Icahn preferred to hold a concentrated portfolio. In today’s more volatile markets, it puts the whole portfolio at risk. Finding a way to diversify the portfolio either by investing in more companies, or different sectors could be a good way to go in the future.
Another issue can be the structure of his assets. Icahn invested in a lot of either illiquid or assets that have low liquidity. This is a challenging factor in situations where he would need to act quickly and sell to prevent big losses. Restructuring his portfolio and filling it with more liquid assets would be a great way to handle potential risks, and to be able to better navigate future sales.
Icahn also had issues with investment execution in the past. Two major problems tend to occur. His activist approach can end up not bearing fruit due to his inability to make a deal with the board. Other shareholders in several instances limited his options and prevented him from implementing the measures that he aimed for.
The second issue is that he in several situations didn’t make a good prediction regarding the investment horizon. Whether he chose a short-term or a long-term approach he several times missed the opportunity to take out the best from the investment.
Future Outlook
Three groups of factors can have a potential impact on Icahn’s outlook, including market landscape, regulatory environment, and shifting portfolio trends.
The market is currently going through a volatility period, due to macroeconomic and geopolitical instability. The rise of interest rates, broken supply lines, and other factors can play a major role in Icahn’s contrarian approach to investing. They can bring both challenges and opportunities, but risks are higher than before.
Icahn prefers to invest in the automotive and energy sectors. Current situations that include energy availability concerns, and a rise in demand for electric cars can bring him much good. But, he needs to be able to adapt to sudden shifts in the market and make decisive decisions when needed.
Regulatory changes had already made an impact on his investment approach. He had to give up his greenmailing strategy. Today the problem could be his traditional investment approach that doesn’t take into account trends like environmental, social, and governance (ESG) factors.
Investors today are encouraged not only to look at well-known parameters. But they also have to take into account companies’ approach to the environment, their employees, and implementation of anti-corruption practices. To be able to attract a wider pool of capital Icahn should start adapting his strategy to incorporate these factors.
FAQs
What Companies Does Icahn Enterprises Own?
Through his diverse holding company Icahn Enterprises L.P. Icahn is maintaining a diverse portfolio. These are the major companies he owns through it:
- CVR Refining LP. A company that owns and operates refineries in Kansas and Oklahoma
- CVR Partners LP. It provides terminal, pipeline, and other logistic services for refined products in the U.S.
- Cheniere Energy. A giant in the liquid natural gas sector
- Pep Boys. A major retailer of auto parts and services in the U.S.
- Viskase Corporation. One of the leaders in the production of casings for meat and other food products
- MV Oil Trust. A major owner of convenience stores in the Eastern United States.
What Are the Holdings of The Icahn Fund?
Icahn fund currently has 14 holdings of which take more than 1% of the portfolio:
- Icahn Enterprises – 61.6%
- CVR Energy Inc. – 18.3%
- Southwest Gas Holdings Inc. – 6.2%
- FirstEnergy Corp. – 4.9%
- Bausch Health Companies Inc. – 2.7%
- Dana Inc. – 1.7%
- Conduent Inc. – 1.2%.
How Does Carl Icahn Invest?
Icahn’s investment strategy is a unique blend of three popular approaches – value investing, contrarianism, and activism.
He follows through on the majority of value investing principles. That includes going against all odds and finding companies that no one else believes in. He then analyzes them and tries to identify the potential for future growth. He escapes the often mistake of value investing, when investors buy cheap stocks of simply bad companies. He is actively looking at the good sides of the company, and how he can reshape it so it can bring results.
When he makes his bid he aims to take a major stake in the company. Then his activism kicks in. He is focused on taking a spot on the board to be able to make crucial decisions. In the past, he often focused on aiming to make short-term benefits for himself, which went against the company’s interest. But, now, his approach is more direct, and he wants to improve companies in the long term.
Often his approach proved to be risky, resulting in big losses that also damaged his reputation. But, he is well aware of the risks, and he is willingly taking them on. That approach also resulted in several major wins that are still discussed as prime examples of activism investments.
Final Thoughts
Carl Icahn’s often controversial and criticized activist approach always draws attention from the public. He uses similar principles to Warren Buffett and Benjamin Graham and searches for undervalued assets that can benefit him in the long run.
Choosing his investment style can be quite limiting, because of current investment trends that can limit your potential. Nonetheless, Icahn has his share of great both short and long-term investments that resulted in major wins. Throughout his career, he always managed to get on top and adapt to new trading and market conditions.
His current portfolio is based in the energy, gas, and medical sectors, and due to several ill-timed shortings during 2023, his portfolio recently generated significant losses. He saw this error in judgment and pledged to his stakeholders that he would return his holdings on track in record time.
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