We recently compiled a list of the Carl Icahn Stock Portfolio: 7 Best Stocks to Buy. In this article, we are going to take a look at where CVR Energy Inc. (NYSE:CVI) stands against the other stocks in the Carl Icahn Stock Portfolio.
Carl Icahn is a force to reckon with, having made a name and billions of dollars on questioning decisions and strategies of corporate leaders on Wall Street for decades. Often referred to as the ‘lone wolf of Wall Street,’ he will go down in history for his reputation and legacy as the most feared man on Wall Street.
At 88 years old, one would expect the billionaire investor to slow down. However, that is not the case. Icahn continues to send shockwaves with his moves and sentiments about the economy and the stock market.
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Nevertheless, bad press has been putting pressure on the legendary investor recently. He remains embroiled in allegations that he has been issuing unsustainably high dividends through his investment firm while also obtaining large amounts of personal loans through his holdings in the company. In 2023, short-selling firm Hindenburg Research questioned the dividends on offer and Icahn’s borrowing spree, terming the action a Ponzi-like scheme.
Without admitting wrongdoing, the legendary investor has already agreed to pay $2 million to settle US Securities and Exchange Commission charges that he failed to disclose significant borrowing against his shares. Everything broke loose as Icahn’s investment firm lost more than 70% in market value, and the firm remains under scrutiny from Wall Street investors.
According to Gordon Haskett of Gordon Haskett Research Advisors, investors on Wall Street might lose confidence in the billionaire investor. For starters, there are concerns that further losses to Icahn’s investment firm could force investors to sell companies they currently hold.
Icahn rose to prominence by diversifying his investments on Wall Street into various sectors. His diversification has seen him invest in some of the market leaders in real estate, energy, financials, and the technology sectors.
The billionaire investor boasts an impressive track record of an average annualized return of 14%, trumping the S&P 500 return by 6%, between 2000 and 2022. The solid return stems from the billionaire investor leveraging an assertive investment strategy to acquire stakes in companies he believes are trading below their fair value.
Icahn has always used his influence to drive strategic changes as part of activist campaigns to unlock hidden value. He is best known for engaging in proxy fights, making public demands, and launching hostile takeovers as long as he believes there is an opportunity to unlock hidden value.
Given that Icahn is known for the high-risk high, reward strategy, his portfolio comprises stocks that have some hidden value that can be unlocked by doing the hard things. While more opportunistic and less focused on specific sectors, Icahn’s holdings are spread across the technology, healthcare, and energy sectors.
Carl Icahn has amassed a fortune worth billions by investing in and advocating for profitable transformations in undervalued companies. Given his impressive history, it’s understandable that both Wall Street and Main Street investors are always eager to learn about the best stocks to buy.
His portfolio is well positioned to benefit from the US Federal Reserve cutting interest rates by 50 bases to support the struggling economy. The impact of lower interest rates on stocks largely depends on the underlying fundamentals—namely, the performance of corporate profits and the direction of the US economy, whether it’s moving towards a gentle or severe downturn. Analysts at Wells Fargo think that the global economy will also see advantages, given that major central banks globally have already reduced interest rates or are planning to do so soon.
Should the economy navigate a soft landing, a mix of lower interest rates and strong economic fundamentals will favor specific market segments, including real estate and smaller companies in which Icahn is heavily invested.
Moreover, Wall Street is optimistic that the decrease in interest rates will encourage well-established and financially solid companies to boost their spending and investments, which is expected to be reflected in their stock prices during the second half of 2024 and the beginning of 2025.
Our Methodology
To compile the list of the best stocks to buy, according to Carl Icahn, we scanned the legendary investor’s 13F portfolio at the end of Q2 2024. We analyzed the top seven stocks based on Icahn’s holdings focusing on why they stand out as solid investment plays. Finally, we ranked the stocks in ascending order based on the value of Icahn Capital’s stake in them.
At Insider Monkey, we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A tanker filled with crude oil slowly unloading its cargo onto a container ship.
CVR Energy Inc. (NYSE:CVI)
Carl Icahn’s Q2 2024 Stake: $1.79 Billion
Number of Hedge Fund Investors as of Q2 2024: 15
CVR Energy, Inc. (NYSE:CVI) is Carl Icahn’s best stock to buy to diversify an investment portfolio in the energy sector. The company specializes in refining and supplying gasoline, crude oil, distillate, diesel fuel, and other refined products.
In addition to being the second biggest holding, Icahn controls 66% of the company’s shares. Nevertheless, it has been under immense pressure, with oil prices dropping close to $70 a barrel in recent months.
CVR Energy, Inc. (NYSE:CVI) has also come under pressure to face stiff competition in its bid to acquire Citgo Petroleum for $8 billion. An investment group led by Gold Reserve and a unit of Koch Industries has already placed a $9 billion acquisition bid as well.
Citgo was expected to be a value addition to CVR Energy, Inc. (NYSE:CVI) as it has been profitable, reporting a net income of $410 million in the first quarter. On the other hand, CVR posted a net income of $21 million in the second quarter with earnings per share of $0.21.
CVR Energy, Inc. (NYSE:CVI) stands out as one of Carl Icahn’s top investment plays because it pays a forward annual dividend yield of 8.74%. The company has also announced a 50 cents cash dividend per share and declared a $1.90 cash distribution per common unit. The company also exited the second quarter in a solid financial position, with its cash and cash equivalents increasing by $5 million to $586 million.
Insider Monkey’s second-quarter data shows that 15 hedge funds were optimistic about CVR Energy, Inc. (NYSE:CVI), down from 20 in the previous quarter. The largest stakeholder is Carl Icahn’s Icahn Capital LP.
Overall CVI ranks 2nd on our list of the best stocks to buy according to Carl Icahn. While we acknowledge the potential of CVI as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than CVI, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.