Herbalife Ltd. (HLF), Dell Inc. (DELL): What Icahn Is Buying

Every quarter, many money managers have to disclose what they’ve bought and sold, via “13F” filings. Their latest moves can shine a bright light on smart stock picks.

Today, let’s look at investing giant Carl Icahn, who has made billions, partly by taking large positions in companies and pushing for change in them. These companies have included Texaco, RJR Nabisco, and Imclone. He’s also drawn to companies in or near bankruptcy, wanting to make them more valuable in order to sell them at a higher price.

Icahn Associates’ reportable stock portfolio totaled $17.0 billion in value as of March 31, 2013. Its top three holdings, Icahn Enterprises LP (NASDAQ:IEP), CVR Energy, Inc. (NYSE:CVI), and Chesapeake Energy Corporation (NYSE:CHK), make up 60% of the overall portfolio’s value. Chesapeake is finally under new management, and has been shedding assets to help it pay down debt, while also aiming to boost production. It’s poised to profit from rising natural gas prices.

Interesting developments
So what does Icahn Associates’ latest quarterly 13F filing tell us? Here are a few interesting details:

The biggest new holdings are Herbalife Ltd. (NYSE:HLF) and CVR Refining, L.P. Other new holdings of interest include Nuance Communications Inc. (NASDAQ:NUAN) and Dell Inc. (NASDAQ:DELL). Herbalife Ltd. (NYSE:HLF), up 10% over the past year, has some high-profile critics, such as David Einhorn of Greenlight Capital and Bill Ackman of Pershing Square Capital Management. The company has been reporting solid results, with its first quarter featuring revenue up 17%, net profit up 10%, and expectations for double-digit near-term growth. It sports an attractive 2.7% dividend yield, but some worry about its multilevel-marketing strategy, and others are waiting for the dust to settle.

Nuance Communications Inc. (NASDAQ:NUAN), specializing in speech-recognition software, took a dive late last month, after posting disappointing earnings. The company is threatened by weak demand, shrinking margins, and intensifying competition, and a change in how it’s compensated, with more focus on usage. The stock’s low valuation makes it look attractive, but some doubt how quickly it can grow. Icahn must see potential, though.

Icahn and fellow major shareholder Southeastern Asset Management have teamed up to try and buy Dell Inc. (NASDAQ:DELL), against the wishes of founder Michael Dell, who’s looking to take the company private with the help of private equity firm Silver Lake Partners. Dell has been struggling as PC sales have weakened. It’s retooling itself, in part by buying Enstratius, to help it compete against large rivals. But Dell Inc. (NASDAQ:DELL)’s first-quarter results featured profits down some 50%, making it hard for many to have faith.

Icahn Associates increased its stake in Transocean LTD (NYSE:RIG), with Icahn agitating for a big dividend payout. Shareholders recently voted out the chairman and voted in an Icahn-backed nominee, but they supported the company’s proposed $2.24 dividend, instead of Icahn’s suggested $4.00. It has posted losses in recent years, in part due to rig downtime, but its last quarterly report featured profits and higher-than-expected revenue. It has a solid backlog, too.