Tracking Carl Icahn’s Portfolio – Q2 2016 Update

This article is part of a series that provides an ongoing analysis of the changes made to Carl Icahn’s US stock portfolio on a quarterly basis. It is based on Icahn’s regulatory 13F Form filed on 08/15/2016. 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 Q1 2016.

This quarter, Icahn’s US long portfolio decreased ~6% from $21.49B to $20.28B. The number of holdings remained steady at 21. The portfolio is very concentrated with the largest five positions accounting for ~63% of the entire holdings: Icahn Enterprises, American International Group, PayPal Holdings, Cheniere Energy, and Freeport-McMoRan.

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 9).

Stake Disposals:

Seventy Seven Energy (NYSE:SSE): SSE was a minutely small 0.01% of the US long portfolio position established in Q3 2014 as a result of the spin-off from Chesapeake Energy. Chesapeake Energy shareholders received SSE shares in the ratio 1:14. Icahn controlled ~9% of the business. In June, the company filed for Chapter 11 bankruptcy.

Enzon Pharmaceuticals (NASDAQ:ENZN): ENZN was a minutely small 0.01% long-term stake. The bulk of the position was purchased in 2011 at much higher prices. This quarter saw the position disposed of at prices between $0.45 and $$0.55. The stock is now at $0.38.

Note: Icahn owned ~14% of ENZN as of Q1 2016 and the disposal resulted in realized long-term losses.

New Stakes:

Allergan plc (NYSE:AGN): AGN is a medium-sized 3.88% of the portfolio stake established this quarter at prices between $202 and $278. The stock is now at $253.

Note: AGN is a recent super-investor favorite. Seth Klarman (Baupost), David Tepper (Appaloosa), and Wallace Weitz (Weitz) had large increases this quarter.

Herc Holdings (NYSE:HRI): HRI is a very small 0.73% of the portfolio position established this quarter as a result of the spinoff of Herc Holdings from Hertz Global Holdings. Following the transaction, there was a marginal increase in the position. Icahn controls ~15% of HRI.

Stake Decreases:

Hertz Global Holdings (NYSE:HTZ): HTZ is a 3.12% of the US long 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. The stock currently trades at $51. Icahn owns ~15% of the business. For investors attempting to follow Icahn, HTZ is a good option to consider for further research.

Note: The share count is down significantly this quarter because of the spinoff of Herc Holdings. The net position had a marginal increase after accounting for the spinoff ratio (3:15). The prices quoted above are adjusted for this transaction.

Nuance Communications (NASDAQ:NUAN): NUAN is a 1.67% of the US long portfolio stake established in Q1 2013 at prices between $18 and $25. The position was increased by roughly two-thirds in Q3 2013 at prices between $18.31 and $20. Last quarter saw an about turn: ~50% stake reduction at prices between $16.15 and $20.53. This quarter saw another ~28% selling at prices between $14.72 and $19.23. The stock is now at $14.63. Icahn’s ownership is currently at ~8% (~21.65M shares).

PayPal Holdings (NASDAQ:PYPL): PYPL is a fairly large (top three) 6.10% of the 13F 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 last year while keeping the PYPL position steady. This year saw selling in PYPL as well: Last two quarters have seen a combined ~30% reduction at prices between $34.20 and $40.31. The stock currently trades at $38.09.

Stake Increases:

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. The stock currently trades at $58.86. Last two quarters have seen minor increases. The stake is now at 11.91% of the portfolio. It is an activist position and Icahn’s ownership interest is at ~4%. For investors attempting to follow Icahn, AIG is a good option to consider for further research.

Xerox Corporation (NYSE:XRX): XRX is a fairly large 4.64% of the portfolio position established in Q4 2015 at prices between $9.29 and $10.88. Last two quarters have seen minor increases. The stock is now at $9.69. For investors attempting to follow Icahn, XRX is a good option to consider for further research. Icahn controls ~10% of the business.

Note: XRX is an activist stake and Icahn got three board seats earlier this year. Xerox also announced plans to split into two companies.

Icahn Enterprises (NASDAQ:IEP): 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, and to ~117M shares in 2015. The last big increase happened in 2012 when around 20M shares were purchased at prices between $36.50 and $42.50. This year has seen a ~6% increase at prices between $44 and $68. The stock currently trades at $52.68 and the stake is at 89.5% of the business.

Kept Steady:

CVR Energy Inc. (NYSE:CVI): CVI is a fairly large 5.44% of the US long 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 $13.91.

Note: 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 (NYSE:RNF).

CVR Refining LP: CVRR is a small 0.23% of the US long 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 well below that range at $6.45.

Cheniere Energy (NYSEMKT:LNG): LNG is a large (top five) 6.05% portfolio position. The bulk of it was purchased in Q3 2015 at prices between $47.47 and $70.65. Q4 2015 saw a ~15% increase at prices between $36 and $54. The stock currently trades at $45. Icahn’s ownership stake in the business is ~14%.

Note: LNG has strong recent super-investor interest: Seth Klarman (Baupost Group), John Griffin (Blue Ridge Capital), and Stephen Mandel (Lone Pine Capital) have established large stakes.

Chesapeake Energy (NYSE:CHK): CHK was first purchased in 2010 but was quickly sold. The bulk of the current stake was purchased in Q2 2012 at prices between $12.67 and $21.17. The stock currently trades well below those ranges at $6.09. The ownership stake in Chesapeake is at ~9% (~73M shares).

Note 1: Icahn successfully engaged in a proxy fight alongside Southeastern Asset Management that led to the eventual departure of the CEO.

Note 2: The stock prices quoted above are adjusted for the spinoff of Seventy Seven Energy in June 2014. The terms of the deal called for CHK shareholders to receive one share of SSE for every 14 shares of CHK held.

Federal-Mogul (NASDAQ:FDML): FDML is a very long-term 5.68% stake first purchased in 2000. It went through an asbestos-claim related bankruptcy and emerged in 2007 with Icahn owning over 75% of the outstanding shares, as debt he owned got converted into equity. In Q3 2013, FDML had a rights offering and Icahn got 44M of the 51M shares in the offering at $9.78 per share. The stock currently trades at $9.01. Q1 2015 saw a ~14% increase at prices between $12.61 and $16.09. Icahn controls ~82% of the business.

Note: Icahn offered to acquire the rest of the company for $7 per share in February and raised the offer to $8 per share in June.

Freeport-McMoRan Inc. (NYSE:FCX): FCX is a 5.71% (top five) of the portfolio stake established in Q3 2015 at prices between $7.92 and $18.62. The stock currently trades at $11.97. Icahn controls ~10% of the business.

Herbalife (NYSE:HLF): HLF is a 4.91% of the US long portfolio stake first purchased in Q1 2013 in the high-30s price range. The position was marginally increased in Q2 2013 to 17M shares (~18% of business). The stock currently trades at $63.31.

Manitowoc Company (NYSE:MTW): MTW is a very small 0.28% of the portfolio activist stake. It was established in Q4 2014 at prices between $3.76 and $5.22 and increased by ~136% in Q1 2015 at prices between $4.01 and $5.17. The stock currently trades at $5.03.

Note: The prices quoted above are adjusted for Manitowoc Food Service spin-off.

Manitowoc Food Service (NYSE:MFS): The very small 0.92% of the portfolio MFS stake was established as a result of the spin-off from Manitowoc. The spin-off terms called for one share of MFS for each share of MTW held. Icahn held 10.58M shares of MTW for which he received the same number of MFS shares. Regular-way trading started in early March with MFS at $13.41. It currently trades at $16.65 compared to Icahn’s cost-basis of ~$15. He controls ~8% of the business.

Navistar International (NYSE:NAV): NAV is a relatively small 0.94% of the US long portfolio long-term position. The last significant activity follow: ~22% increase in Q2 & Q3 2014 at prices between $29 and $38. The stock currently trades at $14.27. Icahn controls ~20% of the business.

Transocean Ltd. (NYSE:RIG): RIG is a small 1.26 % of the US long portfolio stake first purchased in Q4 2012 at prices between $44.20 and $49.50. The position was increased by ~250% in Q1 2013 at prices between $44 and $60. The stock currently trades well below those ranges at $10.49.

Voltari Corporation (NASDAQ:VLTC): VLTC position was increased by ~600% in Q1 2015 to a 52.3% ownership stake. As a percentage of the portfolio, the position is minutely small. The stake increase came about from Voltari’s rights offering in February: 95% of the issued shares were acquired by Icahn by making use of the oversubscription privilege at a cost-basis of $1.36. The stock currently trades at $3.27.

American Railcar Industries (NASDAQ:ARII): ARII is a long-term 2.31% of the portfolio position held steady this quarter. Icahn owns ~61% of ARII.

Note: Icahn also owns significant stakes in the following OTC stocks as per latest 10Q: ~73.3% of Viskase Companies (OTCPK:VKSC) and ~68.5% of Tropicana Entertainment (OTCQB:TPCA).

The spreadsheet below highlights changes to Icahn’s US stock holdings in Q2 2016: