Southwest Gas Holdings, Inc. (SWX): Among Top Stock Picks From Carl Icahn’s Portfolio

We recently published a list of Carl Icahn Stock Portfolio: Top 10 Stock Picks. In this article, we are going to take a look at where Southwest Gas Holdings, Inc. (NYSE:SWX) stands against other top stock picks from Carl Icahn’s portfolio.

Billionaire hedge fund manager Carl Icahn was known as a corporate raider in the 1980s, although he is now more commonly referred to as an activist investor. Icahn is a relentless and self-consciously contrarian investor with a keen eye for undervalued opportunities. Valuing hard assets, he has often stated that he prefers to purchase unglamorous, out-of-favor companies. The same is true for his investment wheel,  Icahn Capital LP, which is well-known for its aggressive and high-stakes activism efforts, establishing itself as one of the world’s most powerful and prominent hedge funds. Boasting an impressive track record, the billionaire investor achieved an average annualized return of 14% between 2000 and 2022, outperforming the S&P 500 by 6%.

One of the most well-known examples of Icahn’s corporate raiding is his aggressive purchase of TWA in 1985. He obtained a majority share in the airline and then fought bitterly with management over the company’s future. Despite criticism from TWA management, Icahn eventually emerged triumphant, turning the firm around and increasing its worth. Another significant example of Icahn’s activism was his participation in the Dell acquisition in 2013. Icahn invested heavily in the firm and then mounted a public campaign opposing Michael Dell and Silver Lake Partners’ proposed takeover. Icahn claimed that the planned takeover undervalued the firm and sought that the buyout price be raised.

Although the 89-year-old investor earned a name for himself (alongside billions of dollars) by criticizing business executives’ policies and plans and advocating for reform within firms, it appears that the tide has shifted, as Icahn is now under heavy scrutiny from Wall Street investors, who are swiftly dumping his company’s shares. Shares of Icahn Enterprises, his publicly traded investment business, have fallen more than 48% in the last year. Shares began to fall in May 2023, when Nate Anderson’s short-selling firm, Hindenburg Research, issued a study doubting the company’s financials. Among other things, Hindenburg accused the company of paying an unsustainable dividend. In a September 2024 interview, Anderson predicted that its shares would continue to plummet, claiming Icahn’s frequent use of personal debts remains a threat to the company’s viability. As an illustration of the troubles the activist investor faces, Icahn Capital LP saw losses exceeding $3 billion from Q4 2023 to Q4 2024.

Our Methodology

For our list of Carl Icahn’s top stock picks, we scanned the legendary investor’s 13F portfolio at the end of Q4 2024. We ranked the top 10 stocks in ascending order based on the value of Icahn Capital’s stake in them as of the end of the quarter.

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 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).

Southwest Gas Holdings, Inc. (SWX): Among Top Stock Picks From Carl Icahn's Portfolio

An engineer inspecting pipeline equipment.

Southwest Gas Holdings, Inc. (NYSE:SWX)

Carl Icahn’s Q4 2024 Stake: $681.1 million

Southwest Gas Holdings, Inc. (NYSE:SWX) is a gas utility based in Las Vegas, Nevada. Over 2 million residential, commercial, and industrial clients in Arizona, Nevada, and California rely on the company’s natural gas services.

Southwest Gas Holdings, Inc. (NYSE:SWX) demonstrated resilience in the fourth quarter of 2024, increasing its utility operating profit by $72.5 million for the year. The rise was fueled mostly by $66 million in rate cuts in Nevada and California, as well as a $12 million lift from higher consumer traffic. The firm also managed a slight 2% increase in operating and maintenance expenditures, keeping them below inflation.

Despite the earnings surprise delivered on February 26, Southwest Gas Holdings, Inc. (NYSE:SWX) shares fell 3.02% in premarket trading, closing at $77.28. This fall happened as investors weighed the quarterly performance against broader market conditions and the company’s future prospects. That said, the stock remains within its 52-week range, with highs of $80.29 and lows of $62.48.

O’keefe Stevens Advisory stated the following regarding Southwest Gas Holdings, Inc. (NYSE:SWX) in its Q3 2024 investor letter:

“Southwest Gas Holdings, Inc. (NYSE:SWX) – In our income portfolio, we initiated a position in Southwest Gas Corporation, a utility provider in Nevada, Arizona, California, and Utah. Florida has become less affordable due to higher insurance costs (in parts, unable to get) and rising HOA fees. And as desirability declines resulting from increasing natural disasters. The likelihood of future retirees opting for locations where they do not have to worry about their house getting destroyed or moving into a residential complex that could become unaffordable on a fixed income will result in a generation no longer retiring in the southeast—instead, the West. Population growth will drive incremental power demand in Southwest’s regions.

Anecdotal conversations with friends cited the inability to close on a home in Florida as they could either not find insurance or the quote made the home unaffordable. While Florida has a beneficial tax code, making it cheaper on the surface to live relative to Arizona and Nevada, the cost of living differential is slowly eroding these benefits, which is unlikely to reverse…” (Click here to read the full text)

Overall, SWX ranks 3rd on our list of top stock picks from Carl Icahn’s portfolio. While we acknowledge the potential of SWX as an investment, our conviction lies in the belief that certain AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than SWX but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

READ NEXT: 20 Best AI Stocks To Buy Now and Complete List of 59 AI Companies Under $2 Billion in Market Cap

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