We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (read our latest 10 coronavirus predictions).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. With the first-quarter round of 13F filings behind us it is time to take a look at the stocks in which some of the best money managers in the world preferred to invest or sell heading into the first quarter. One of these stocks was Icahn Enterprises LP (NASDAQ:IEP).
Is Icahn Enterprises LP (NASDAQ:IEP) a buy, sell, or hold? The best stock pickers are turning less bullish. The number of bullish hedge fund bets went down by 1 lately. Our calculations also showed that IEP isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video below for Q3 rankings).
Today there are several signals investors have at their disposal to grade their holdings. Two of the less utilized signals are hedge fund and insider trading signals. Our experts have shown that, historically, those who follow the top picks of the best hedge fund managers can trounce the market by a significant margin (see the details here).
Carl Icahn of Icahn Capital
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind let’s go over the recent hedge fund action surrounding Icahn Enterprises LP (NASDAQ:IEP).
What does smart money think about Icahn Enterprises LP (NASDAQ:IEP)?
At Q4’s end, a total of 4 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -20% from the previous quarter. On the other hand, there were a total of 6 hedge funds with a bullish position in IEP a year ago. With hedge funds’ sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were increasing their holdings considerably (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, Carl Icahn’s Icahn Capital LP has the biggest position in Icahn Enterprises LP (NASDAQ:IEP), worth close to $12.1186 billion, amounting to 46.3% of its total 13F portfolio. The second largest stake is held by Horizon Asset Management, managed by Murray Stahl, which holds a $84.4 million position; 2.4% of its 13F portfolio is allocated to the stock. Remaining members of the smart money that are bullish consist of Ken Griffin’s Citadel Investment Group, and Renaissance Technologies. In terms of the portfolio weights assigned to each position Icahn Capital LP allocated the biggest weight to Icahn Enterprises LP (NASDAQ:IEP), around 46.29% of its 13F portfolio. Horizon Asset Management is also relatively very bullish on the stock, earmarking 2.39 percent of its 13F equity portfolio to IEP.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Marshall Wace LLP. One hedge fund selling its entire position doesn’t always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don’t think this is the case in this case because none of the 750+ hedge funds tracked by Insider Monkey identified IEP as a viable investment and initiated a position in the stock.
Let’s go over hedge fund activity in other stocks similar to Icahn Enterprises LP (NASDAQ:IEP). We will take a look at Duke Realty Corporation (NYSE:DRE), Continental Resources, Inc. (NYSE:CLR), W.R. Berkley Corporation (NYSE:WRB), and Vornado Realty Trust (NYSE:VNO). All of these stocks’ market caps are closest to IEP’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| DRE | 24 | 183153 | 5 |
| CLR | 38 | 569767 | -1 |
| WRB | 34 | 417937 | 8 |
| VNO | 31 | 688640 | -6 |
| Average | 31.75 | 464874 | 1.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 31.75 hedge funds with bullish positions and the average amount invested in these stocks was $465 million. That figure was $12206 million in IEP’s case. Continental Resources, Inc. (NYSE:CLR) is the most popular stock in this table. On the other hand Duke Realty Corporation (NYSE:DRE) is the least popular one with only 24 bullish hedge fund positions. Compared to these stocks Icahn Enterprises LP (NASDAQ:IEP) is even less popular than DRE. Hedge funds clearly dropped the ball on IEP as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 22.3% in 2020 through March 16th but still beat the market by 3.2 percentage points. A small number of hedge funds were also right about betting on IEP as the stock returned -19.3% during the same time period and outperformed the market by an even larger margin.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
