Icahn Capital Adds Conduent (CNDT) to Its 13F Portfolio; Plus Billionaire Activist’s Other Top Q1 Moves

Out of the thousands of hedge funds out there, it’s easy to miss some of the high-flyers. The media primarily covers bigger funds run by activists or billionaires, because they have a longer track record and because the public is more interested in the stock picks and other actions of investors who made a fortune on the stock market. This in turn leads to many potential future stars being overlooked. For example, how many stories have you read about Bill Ackman‘s disastrous bet on Valeant Pharmaceuticals Intl Inc (NYSE:VRX)? Probably a lot. But have you heard about a fund named Sarissa Capital Management led by Alex Denner? Probably not. Sarissa Capital’s stock picks managed to return more than 200% over the last year according to our calculations, including 53% gains year-to-date.

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One investor that has been in the spotlight more than usual lately is billionaire activist Carl Icahn. Icahn is one of the most successful and well-known activists on the Street, as well as one of the most feared by corporate boards. However, lately he has been followed for his involvement in politics. Icahn voiced his support for Donald Trump during the presidential campaign and has earned a place as a special adviser on regulatory matters in the Trump administration. However, the overlap between Icahn’s business and the special adviser position has raised some questions on the Hill. Last week, eight Democratic senators requested an investigation into some of Icahn’s dealings in relation to CVR Energy, Inc. (NYSE:CVI), a company that is majority-owned by Icahn. As an oil refiner, CVR Energy is required to buy credits for renewable fuels and it is alleged that the company timed the trading of these credits based on information obtained from Icahn, who in turn affected their price through his position. Among other things, Icahn played a role in the nomination of Scott Pruitt (a climate change denier) as the head of the EPA. Pruitt has also criticized the renewable fuel credit program.

On the other hand, our data shows that Icahn’s returns have been somewhat lagging lately, the fund’s stock picks having lost 3.64% year-to-date according to our calculations, which analyze a fund’s positions in companies with market caps above $1 billion. That decline is mainly attributable to its largest holding, which is in Icahn’s own company Icahn Enterprises LP (NASDAQ:IEP), whose stock has declined by over 13% since the beginning of the year. Its second-largest position, American International Group Inc (NYSE:AIG) has also slumped by 5.3%. On the other hand, Cheniere Energy, Inc. (NYSEMKT:LNG), Icahn Capital’s third-largest holding has advanced by over 19% since the beginning of January.

In this article, we are going to take a closer look at some of billionaire activist Carl Icahn’s stock picks as well as some companies in which Icahn Capital has closed its positions, based on its latest 13F filing, released yesterday. More specifically, we’ll discuss Paypal Holdings Inc (NASDAQ:PYPL), in which the fund reduced its stake during the first-quarter, Herbalife Ltd. (NYSE:HLF) and Navistar International Corp (NYSE:NAV), in which Icahn Capital raised its position, as well as Conduent Inc (NYSE:CNDT), which is a new addition to the fund’s portfolio. We’ll also take a closer look at Nuance Communications Inc. (NASDAQ:NUAN), in which the fund closed its stake, after having owned shares for around four years. It’s also worth mentioning that Icahn Capital sold all of its shares of Allergan plc Ordinary Shares (NYSE:AGN), which it had held since the second-quarter of 2016, in addition to reporting the closure of its position in Federal-Mogul Holdings Corp, which reflected the company’s takeover by Icahn Enterprises.

Let’s start with Paypal Holdings Inc (NASDAQ:PYPL), in which Icahn Capital trimmed its position by 5% to 31.57 million shares that were worth $1.36 billion at the end of March. The fund sold around 1.82 million shares between January and March as the stock gained 10.30%, so the move could be explained as portfolio rebalancing. Overall, shares of Paypal Holdings (NASDAQ:PYPL) have advanced by 26% year-to-date, and are up by 25% since the stock went public after being spun-off from eBay Inc (NASDAQ:EBAY) (see our coverage of the spin-off and Icahn’s role in it). Since the IPO, PayPal has been reporting solid results with growing revenue and it is positioned for future growth and expansion. Paypal has partnered with Visa Inc (NYSE:V), Mastercard Inc (NYSE:MA) and Facebook Inc (NASDAQ:FB), which is a bit worrying for some investors, as it might hurt its profit margins on every transaction. However, so far, the company has been reporting profits above expectations and its deals with well-known brands should help it stay ahead of the competition, which would justify lower margins. Senator Investment Group, led by Doug Silverman and Alexander Klabin added Paypal Holdings Inc (NASDAQ:PYPL) to its 13F portfolio during the first-quarter, buying 7.75 million shares.

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Next in line is Herbalife Ltd. (NYSE:HLF), in which Icahn Capital increased its stake by around 372,300 shares to 22.87 million shares worth $1.33 billion. Icahn’s investment in Herbalife Ltd. (NYSE:HLF) has been watched closely, as it illustrated the feud between Icahn and activist Bill Ackman of Pershing Square. Pershing Square has a big short bet against Herbalife and has accused the company of being a pyramid scheme. So far, Ackman has been losing, as Herbalife’s stock is up by 60% over the last five years and is nearly 51% in the green year-to-date. The year-to-date increase comes as Herbalife Ltd. (NYSE:HLF) reported a strong first-quarter, with revenue of $1.1 billion and EPS of $1.24, beating estimates by $50 million and $0.35 respectively. In addition, the company provided upbeat guidance for the full year, which included adjusted diluted EPS of $4.05 to $4.45. The guidance also provided a boost to stocks of other companies in the nutritional supplements industry. Nevertheless, Ackman is not buying it, having said in a recent investor call that the company’s fundamentals are worse than it’s making them look. On the other hand, Icahn seems to be fond of the company and has four seats on its board.

On the next page, we are going to take a closer look at Icahn’s investment in Navistar International Corp (NYSE:NAV), as well as its new portfolio addition Conduent Inc (NYSE:CNDT) and its former portfolio stalwart Nuance Communications Inc. (NASDAQ:NUAN), which it sold off.

Another company in which Icahn increased its position is Navistar International Corp (NYSE:NAV). In its latest 13F filing, Icahn Capital reported holding 16.73 million shares of the company, up by 2% on the quarter, with the value of the larger position being $411.89 million. Following the increase, Icahn owns 17% of the maker of trucks and parts. Navistar International Corp (NYSE:NAV)’s stock has lost 13% since the beginning of the year, as the company reported a much wider-than-expected net loss of $0.76 per share (vs. estimates of a $0.43 loss). Another investor bullish on Navistar International Corp (NYSE:NAV) is Mark Rachesky’s MHR Fund Management, which disclosed ownership of 16.23 million shares as of the end of March.

The only company in which Icahn Capital initiated a stake during the first quarter is Conduent Inc (NYSE:CNDT), a $3.5 billion provider of business process services that went public in December. At the end of March, Icahn held 19.81 million shares of the company worth $332.35 million. Conduent Inc (NYSE:CNDT) also caught the attention of several other big investors during the first three months of 2017. For example, billionaire David Einhorn’s Greenlight Capital added 5.96 million shares to its position, while David S. Och’s OZ Management and Steve Cohen’s Point72 Asset Management initiated stakes that contained 3.80 million shares and 2.55 million shares respectively. Last week, Conduent Inc (NYSE:CNDT) posted its second financial report since the IPO, which included EPS of $0.16 and revenue of $1.55 billion. While the bottom-line result was in-line with analysts’ estimates, the top-line was $20 million lower than expected and showed a decline of 8.3% on the year.

Finally, Icahn closed its position in Nuance Communications Inc. (NASDAQ:NUAN), in which it had held 18.38 million shares worth $273.83 million at the end of the fourth-quarter. The move comes as the stock gained 16% during the first-quarter, although it has advanced by another 13% since the end of March. It’s worth mentioning that shortly after Icahn acquired a stake in Nuance Communications Inc. (NASDAQ:NUAN) in 2013, speculation started to appear that the investor might push for the company to be acquired by Apple Inc. (NASDAQ:AAPL), in which Icahn was one of the largest shareholders at the time. However, Icahn said that he did not intend to do that. Instead he got to appoint two board directors. In the last two years, Nuance has been posting financial results mostly above estimates. In addition, the company recently signed a deal with Lexmark, under the terms of which the latter will provide Nuance Communications Inc. (NASDAQ:NUAN)’s document imaging solutions worldwide. On the other hand, John Brennan’s Sirios Capital Management boosted its position in Nuance by 2.35 million shares to 3.37 million shares during the first-quarter.

Disclosure: None