Is IEP Stock A Buy Here?

In this article we are going to use hedge fund sentiment as a tool and determine whether Icahn Enterprises LP (NASDAQ:IEP) is a good investment right now. We like to analyze hedge fund sentiment before conducting days of in-depth research. We do so because hedge funds and other elite investors have numerous Ivy League graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is not a shortage of news stories covering failed hedge fund investments and it is a fact that hedge funds’ picks don’t beat the market 100% of the time, but their consensus picks have historically done very well and have outperformed the market after adjusting for risk.

Is IEP stock a buy? Hedge fund interest in Icahn Enterprises LP (NASDAQ:IEP) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that IEP isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings). The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Brown & Brown, Inc. (NYSE:BRO), Enel Americas S.A. (NYSE:ENIA), and F5 Networks, Inc. (NASDAQ:FFIV) to gather more data points.

To the average investor there are numerous metrics investors employ to appraise stocks. A pair of the best metrics are hedge fund and insider trading sentiment. Our experts have shown that, historically, those who follow the top picks of the top hedge fund managers can outclass the market by a healthy amount (see the details here). Also, our monthly newsletter’s portfolio of long stock picks returned 206.8% since March 2017 (through May 2021) and beat the S&P 500 Index by more than 115 percentage points. You can download a sample issue of this newsletter on our website .

Carl Icahn of Icahn Capital

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, an activist hedge fund wants to buy this $27 biotech stock for $50. So, we recommended a long position to our monthly premium newsletter subscribers. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. With all of this in mind let’s take a gander at the new hedge fund action regarding Icahn Enterprises LP (NASDAQ:IEP).

Do Hedge Funds Think IEP Is A Good Stock To Buy Now?

Heading into the second quarter of 2021, a total of 4 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from one quarter earlier. By comparison, 3 hedge funds held shares or bullish call options 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 meaningfully (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Carl Icahn’s Icahn Capital LP has the largest position in Icahn Enterprises LP (NASDAQ:IEP), worth close to $11.9124 billion, accounting for 50% of its total 13F portfolio. The second largest stake is held by Horizon Asset Management, led by Murray Stahl, holding a $31.9 million position; 0.7% of its 13F portfolio is allocated to the stock. Remaining members of the smart money with similar optimism contain Ken Griffin’s Citadel Investment Group, and Paul Marshall and Ian Wace’s Marshall Wace LLP. In terms of the portfolio weights assigned to each position Icahn Capital LP allocated the biggest weight to Icahn Enterprises LP (NASDAQ:IEP), around 49.95% of its 13F portfolio. Horizon Asset Management is also relatively very bullish on the stock, designating 0.72 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: PEAK6 Capital Management. 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 only one of the 800+ hedge funds tracked by Insider Monkey identified as a viable investment and initiated a position in the stock (that fund was Marshall Wace LLP).

Let’s now take a look at hedge fund activity in other stocks similar to Icahn Enterprises LP (NASDAQ:IEP). These stocks are Brown & Brown, Inc. (NYSE:BRO), Enel Americas S.A. (NYSE:ENIA), F5 Networks, Inc. (NASDAQ:FFIV), Bentley Systems, Incorporated (NASDAQ:BSY), LKQ Corporation (NASDAQ:LKQ), Packaging Corporation Of America (NYSE:PKG), and UWM Holdings Corporation Class (NYSE:UWMC). This group of stocks’ market valuations are closest to IEP’s market valuation.

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As you can see these stocks had an average of 24 hedge funds with bullish positions and the average amount invested in these stocks was $554 million. That figure was $11951 million in IEP’s case. LKQ Corporation (NASDAQ:LKQ) is the most popular stock in this table. On the other hand Enel Americas S.A. (NYSE:ENIA) is the least popular one with only 11 bullish hedge fund positions. Compared to these stocks Icahn Enterprises LP (NASDAQ:IEP) is even less popular than ENIA. Our overall hedge fund sentiment score for IEP is 25. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 17.2% in 2021 through June 11th but managed to beat the market by 3.3 percentage points. A small number of hedge funds were also right about betting on IEP, though not to the same extent, as the stock returned 8.1% since the end of March (through June 11th) and outperformed the market as well.

Disclosure: None. This article was originally published at Insider Monkey.