Carl Icahn‘s Icahn Capital LP is a New York-based diversified holding company founded and managed by the legendary activist investor. Icahn is one of the world’s most provocative and remarkable activist investors, who uses equity stakes in different companies to put private and public pressure on their management and extract enviable results. Most recently, Icahn’s substantial bet on Apple Inc. (NASDAQ:AAPL) has been an overwhelming success, returning more than $1 billion for the investor, as Apple’s stock has greatly increased since Icahn publicly declared that Apple was dramatically undervalued and called for accelerated share buybacks. Icahn’s investment portfolio consisted of 20 active positions at the end of the first quarter, amounting to a value of $32.05 billion. In this article we’ll look at some of Icahn Capital’s major equity holdings in mid-cap companies with market caps of between $5 billion and $10 billion, which include Hologic Inc. (NASDAQ:HOLX), Hertz Global Holdings Inc. (NYSE:HTZ) and Chesapeake Energy Corporation (NYSE:CHK).
Hedge funds and other big money managers like Icahn tend to have the largest amounts of their capital invested in large and mega-cap stocks like Apple Inc. (NASDAQ:AAPL) because these companies allow for much greater capital allocation (though Icahn himself is somewhat of an exception to this rule, investing in many small- and mid-cap companies). That’s why if we take a look at the most popular stocks among funds, we won’t find any mid- or small-cap stocks there. However, our backtests of hedge funds’ equity portfolios between 1999 and 2012 revealed that the 50 most popular stocks among hedge funds underperformed the market by seven basis points per month, showing that their most popular picks and the ones that received the bulk of their capital were not actually their best picks, doing a disservice to their investors. On the other hand, their top small-cap picks performed considerably better, outperforming the market by 95 basis points per month. This was confirmed through backtesting and in forward tests of our small-cap strategy since August 2012. The strategy, which involves imitating the 15 most popular small-cap picks among hedge funds has provided gains of more than 139%, beating the broader market by over 80 percentage points through the end of April (see the details).
Carl Icahn did not change his equity position in Hologic Inc. (NASDAQ:HOLX), which still amounts to a sizable 34.16 million shares valued at $1.13 billion. It’s been a few weeks since Hologic reported earnings per share of $0.41 for the first quarter, slightly outperforming analysts’ estimates of $0.39 a share; however, the stock is still showing strong signs of improvement. The revenues generated by Hologic grew at a rate of 4.9% on a year-over-year basis for that quarter, beating analysts’ estimates. Despite the fact that Hologic Inc. (NASDAQ:HOLX) has been performing well lately, achieving a hike of slightly more than 32% in its share price since the beginning of the year, there is still more room to run. Another fund that owns a generous stake in Hologic Inc. (NASDAQ:HOLX) is Ralph Whitworth’s Relational Investors.
Icahn also left his position in Hertz Global Holdings Inc. (NYSE:HTZ) unchanged during the first quarter at 51.92 million shares valued at $1.13 billion. Although shares of Hertz dropped by roughly 18% since the beginning of this year, Icahn remains confident about the medium- and long-term financial performance of the American car rental company. This stock might be an attractive investment opportunity for investors seeking a good entry price into the stock. Even though Hertz has been experiencing some accounting and operational issues, the company is working to get back on track. Some other funds that remain bullish on Hertz Global Holdings Inc. (NYSE:HTZ) by building up their stakes in the company during the first quarter include Barry Rosenstein’s JANA Partners and Jeffrey Altman’s Owl Creek Asset Management.
Icahn increased his equity holding in Chesapeake Energy Corporation (NYSE:CHK) to 73.05 million shares valued at almost $1.034 billion, an increase of 6.60 million shares during the first quarter. Buying energy stocks has required a strong stomach lately and Chesapeake Energy Corporation is no different, with the firm being downgraded by a number of investment banks and other institutions recently, including Goldman Sachs. The share price of Chesapeake Energy Corporation has been declining along with the price of crude oil, which is falling in part because of the strengthening U.S. dollar. However, even though the future financial performance of the company relies heavily on the price of crude, a number of other hedge funds including John Kim’s Karamaan Group still remain bullish on Chesapeake Energy Corporation (NYSE:CHK).
Disclosure: None
