Billionaire investor Carl Icahn developed a reputation as a corporate raider in the 1980s but is better known today as a shareholder activist. He buys large stakes in undervalued companies to push for changes, often through gaining seats on boards of directors.
Most recently Icahn won seats on JetBlue Airways (NASDAQ:JBLU) board just days after disclosing a 10% stake in the airline. He was also using his access to Illumina‘s (NASDAQ:ILMN) board through one of his portfolio managers to sue the biotech’s directors for breach of duty violations.
Icahn Enterprises (NYSE:IEP) is a master limited partnership (MLP) that has $16 billion in assets. It is really a diversified holding company with its assets divided between investments, automotive, food packaging, real estate, home fashion and pharmaceuticals.
Virtually all of its assets and liabilities are owned by Icahn Enterprises Holdings, which conducts all of IEP’s operations. Because it doesn’t want to be classified as an investment company, no more than 40% of IEP’s total assets can be invested in investment securities.
Icahn styles himself a value investor in the vein of Benjamin Graham and David Dodd. He seeks out undervalued businesses with deeply discounted stocks. Where Graham & Dodd bought shares and waited for a turnaround, Icahn is much more active in the companies he targets. He maintains the strategy has resulted in very strong returns for investors over the years.
These are the stocks Carl Icahn is betting on that comprise the MLP’s largest positions, representing 82.8% of his portfolio.
Icahn Enterprises (IEP)
The biggest ownership interest of all the assets held is in the MLP itself, Icahn Enterprise (NASDAQ: IEP). IEP stock represents 57.9% of the total portfolio value, worth some $6.3 billion. He owns some 367.9 million shares of the company or 86% of the total.
That would make Icahn the biggest loser of an investment in the MLP. Shares are flat year to date but down 65% over the past year and have lost almost 85% over the last decade. That seems to belie the claims Icahn’s made about the strong returns. It’s even invited short-sellers to rise up against him.
Last year Hindenburg Research came out with a scathing report about Icahn Enterprises, alleging Icahn vastly overvalues its holdings. The report also charges IEP relies upon a “Ponzi-like” structure to pay dividends, of which Icahn receives the lion’s share. IEP stock plunged 20% on the news and has yet to recover.
It’s certainly a reversal of roles for the billionaire investor who is often the one issuing scathing attacks on management. However the record would suggest IEP stock is not one to buy for most investors.
CVR Energy (CVI)
Icahn Enterprises energy sector consists of CVR Energy (NYSE:CVI), which Icahn acquired a substantial interest in back in 2012. The company is a diversified energy operation with revenue generated from a mix of renewable fuels, petroleum refining and nitrogen-fertilizer production. The refining is conducted through CVR Refining with facilities strategically located near Cushing, OK. The fertilizer manufacturing is through CVR Partners (NYSE:UAN) with facilities in the southern plains and Corn Belt.
CVR is a much better investment than IEP stock. Shares are up 18% in 2024 and 36% over over the last 12 months, though down 12% over the last decade. Last year its regular dividend totaled $2.00 per share and currently yields 5.6% but it also issued two special dividends of $1 and $1.50 per share in July and October, respectively, for a total of $4.50 per share. They were issued due to “solid operating results” but CVR’s regular dividends have fluctuated over time.
Icahn owns 66.7 million shares valued at $2 billion for an 18.5% stake in CVI stock.
Southwest Gas (SWX)
Southwest Gas (NYSE:SWX) is Icahn’s third largest holding. It is the middle-man in the natural gas industry, purchasing, distributing and transporting natural gas across North America. A second component of its operations is as an infrastructure services company that partners with regulated utilities to build and maintain the energy network in the U.S. and Canada.
Curiously, it is held it the investment portion of Icahn’s portfolio rather than in the energy segment. The stock is still performing well, up 12% this year and 18% over the past year. It’s gained more than 33% over the last 10 years, too, though that’s well below the returns of the S&P 500.
Icahn owns 11.2 million shares of SWX stock, valued at $698 million. While that represents 6.4% of Icahn Enterprises’ portfolio, it is a 15.2% ownership stake in the natural gas company. IEP’s president and CEO Andrew Teno has been a director on Southwest’s board since 2022. If you want to invest like Carl Icahn, start here.
On the date of publication, Rich Duprey did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.