We recently compiled a list of the 12 NASDAQ Stocks with Biggest Upside Potential According to Analysts. In this article, we are going to take a look at where Icahn Enterprises (NASDAQ:IEP) stands against the other NASDAQ stocks.
Potomac Wealth Advisors president Mark Avallone joined CNBC’s ‘The Exchange’ on November 16 to discuss where he sees investing opportunities following Trump’s election. He believes investing in the tech sector makes the most sense given the implications of the 2024 election results for the financial markets. He noted that the election has shifted the underlying dynamics affecting businesses, particularly regarding regulation and taxation. The new administration has changed the previous climate of heightened regulation and discussions around increasing capital gains and corporate taxes. Avallone believes that the potential for reduced regulation and lower taxes on corporations could create a more favorable environment for business growth.
He emphasized that corporate America’s ability to deliver earnings will be crucial, relying on continued efficiencies and advancements in technology. This perspective supports his thesis that investing in technology remains a sound strategy for investors. When discussing specific stocks, Avallone highlighted major tech companies from the MAG7 as particularly attractive. He expressed confidence that the current administration would foster a more supportive environment for these companies, allowing them to thrive.
Avallone also touched on the defense sector, which has historically benefited from global conflicts. He pointed out that defense companies have shown resilience and believes that ongoing global tensions will sustain demand for defense stocks, providing a hedge against market volatility.
However, Avallone expressed caution regarding the healthcare sector, which has been lagging due to heavy regulation and political scrutiny. He noted that despite an aging population driving demand for medical equipment, regulatory pressures have hindered growth in this area. Overall, his analysis underscores a cautious optimism about investing in technology and defense while highlighting potential challenges within healthcare as businesses navigate the post-election landscape.
Methodology
We sifted through Finviz to compile a list of 30 NASDAQ stocks with high upside potentials. We then selected the 12 stocks with the biggest upside potential according to analysts. The stocks are ranked in ascending order of their analysts’ upside potential.
Why are we interested in 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 forklift stocking shelves with newly manufactured food packaging products.
Icahn Enterprises (NASDAQ:IEP)
Average Upside Potential as of November 21: 125.49%
Icahn Enterprises (NASDAQ:IEP) is a diversified holding company that operates across multiple sectors, including investment, energy, automotive, food packaging, real estate, home fashion, pharmaceuticals, railcar, mining, and metals. Its investment segment manages proprietary capital through various private investment funds. The energy division refines and markets fuels and manufactures fertilizers. It also engages in automotive repair services and real estate leasing and development.
The company’s value decreased in the third quarter of 2024, dropping by $423 million. Revenue in Q3 was lower than Street expectations and dropped 25.69% as compared to the year-ago period, recording an amount of $2.22 billion. While some investments, like the investment funds, performed well, up 8% year-over-year, others, such as CVR Energy and the auto service business, struggled.
Icahn Enterprises (NASDAQ:IEP) is actively taking steps to improve its auto service business, including making management changes. In Q3, the Auto segment saw a $70 million decrease in net sales and other revenues year-over-year. Automotive services revenues declined by $51 million due to operational issues such as insufficient inventory, staffing levels, and reduced consumer spending on automotive repairs and maintenance. The aftermarket parts business contributed to a $20 million decrease in revenue.
The recent management changes in the auto segment are already yielding positive results, with a significant reversal in revenue trends. Icahn Enterprises (NASDAQ:IEP) believes in its long-term strategy and expects to generate strong returns for shareholders in the future.
Here is what CrossingBridge Advisors has to say about Icahn Enterprises L.P. (NASDAQ:IEP) in its Q3 2022 investor letter:
“Icahn Enterprises LP, headed by investor Carl Icahn, is a diversified holding company with interests in investments, energy, automotive, food packaging, real estate, home fashion and pharmaceuticals. The investment segment derives revenues from gains and losses from investment transactions. Other operating segments, in most cases, are independently operated businesses obtained through a controlling interest.
As of 2Q22, Icahn Enterprises had Indicative Net Asset Value of $6.6 billion, consolidated debt of $7.1 billion and total liquidity, comprised of cash, investment funds and revolving credit availability, of $7.2 billion. Moreover, as of the end of 3Q22, it had an equity market capitalization of $16.0 billion. Thus, we have no concern regarding credit quality. We have traded in and out of the IEP 4.75% senior unsecured bond, due September 2024, since it was issued in February 2020.
In 3Q22, amidst the downdraft in the high yield market, we were able to purchase these bonds at a yield to maturity over 8.20%, very attractive for a 2-year note with such strong credit quality. Purchased at a discount, the bond would have an even higher annualized total return were the company to redeem it prior to September 15, 2023, when it becomes a current obligation. We expect to continue adding to this position opportunistically.”
Overall IEP ranks 4th on our list of the NASDAQ stocks with biggest upside potential according to analysts. While we acknowledge the potential of IEP as an investment, our conviction lies in the belief that AI stocks hold great promise for delivering high returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than IEP but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 8 Best Wide Moat Stocks to Buy Now and 30 Most Important AI Stocks According to BlackRock.
Disclosure: None. This article is originally published at Insider Monkey.