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Regular investors normally can only benefit from individual stocks that are targeted by these behemoths of the market. In other words, it’s a hit or miss proposition.
However, we have discovered a way that allows you to “ride the coattails” of the giants who participate and control these ultra-high return strategies.
In fact, this tactic follows in the exact footsteps of the greatest practioner of this wealth building strategy.
If you haven’t already guessed it, I am talking about a tactic known as activist investing.
There is little question that the greatest and wealthiest practioner of activist investing is Carl Icahn.
The method of participating alongside Mr. Icahn in his activism is via his publically traded holding company, Icahn Enterprises (NYSE:IEP).
Right now is a great time to jump onboard this dividend paying, high potential stock!
First let’s take a closer look at Icahn’s recent successes.
Earlier in the year, Icahn tweeted out to his followers that he had purchased a 52% ownership stake in a small digital marketing firm called Voltari (Nasdaq: VLTC). The stock soared over 800% in the next 30 days.
Icahn’s followers follow him due to his success in the financial markets. He boasts the title of the world’s 31st richest individual, with a net worth estimated at $21 billion. That personal wealth didn’t come from traditional sources. It is the direct result of activist investing.
Another recent success is $2 billion of profits from Netflix (Nasdaq: NFLX). The movie streaming company’s shares jumped 12-fold during his ownership term.
Icahn’s activism have earned extreme profits for his investors as well. He boasts annualized returns of 19.7% since 2000, his fund has posted a cumulative gain of 1,485%. Very, very few on Wall Street can match these huge gains.
He has a hugely impressive historic record. Let’s take a brief look at Carl Icahn so you will understand who you will be investing alongside.
According to Icahn’s website, his efforts have unlocked billions of dollars of shareholder and bondholder value and have improved the competitiveness of American companies.
He and his affiliated companies currently own businesses in a wide range of industries, including real estate, telecommunications, transportation, industrial services, oil refining and manufacturing. Companies in which he and his affiliates currently own majority positions include American Railcar, XO Communications, PSC Metals, Tropicana Entertainment, Viskase Companies, CVR Energy, WestPoint Home, Icahn Enterprises LP, and Federal-Mogul. He and his affiliated companies also own stakes in many other public companies. Icahn Enterprises LP, his flagship company, has acquired many of these positions.
Carl is a New York City native and grew up in Far Rockaway, Queens. After receiving a degree in philosophy from Princeton University in 1957, he attended medical school at New York University and then joined the Army.
In 1961 Carl began his career on Wall Street. He has gone on to become one of the most well-known and influential investors in America. In 1968, he formed Icahn & Co., a securities firm that focused on arbitrage and options trading.
In 1978, he began taking very substantial and sometimes controlling positions in individual companies.
Over the years, these positions include RJR Nabisco, Texaco, Phillips Petroleum, Western Union, Gulf & Western, Viacom, Uniroyal, Dan River, Marshall Field, E-II (Culligan and Samsonite), American Can, USX, Marvel, Revlon, ImClone, Fairmont, Kerr-McGee, Time Warner, Yahoo!, Lions Gate, CIT, Motorola, Genzyme, Biogen, BEA Systems, Chesapeake Energy, El Paso, Amylin Pharmaceuticals, Regeneron, Mylan Labs, KT&G, Lawson Software, MedImmune, Dell, Herbalife, Navistar International, Transocean, Take-Two, Hain Celestial, Mentor Graphics, Netflix, Forest Laboratories, Apple and eBay.
Before we get into the stock itself, what exactly is activist investing?
Investopedia defines activist investing as
An individual or group that purchases large numbers of a public company’s shares and/or tries to obtain seats on the company’s board with the goal of effecting a major change in the company. A company can become a target for activist investors if it is mismanaged, has excessive costs, could be run more profitably as a private company or has another problem that the activist investor believes it can fix to make the company more valuable.
Investing in IEP is not a bet on any single stock, industry or even the stock market. It’s a bet that Carl Icahn will be able to continue his proven success.
Icahn Enterprises (NYSE:IEP) is a diversified holding company. The Company owns subsidiaries, which are engaged in the following operating businesses: Investment, Automotive, Energy, Metals, Railcar, Gaming, Food Packaging, Real Estate and Home Fashion. The Company owns a 99% limited partner interest in Icahn Enterprises Holdings L.P. (Icahn Enterprises Holdings). All of its assets and liabilities are owned through Icahn Enterprises Holdings and all of its operations are conducted through Icahn Enterprises Holdings and its subsidiaries. The Company’s subsidiaries include CVR Energy, Inc., WestPoint Home LLC, Viskase Companies, Inc., Tropicana Entertainment Inc. and PSC Metals, Inc.
Looking at some specifics, the company has majority ownership in CVR Energy (NYSE: CVI), whose refineries and crop fertilizer operations created $415 million in cash flows.
In addition, IEP owns high tech winners like Apple (Nasdaq:AAPL) with 53 million shares and a stake valued at $6.6 billion
However, the company’s metals and energy holdings have been suffering from very bearish macro headwinds that have hurt the bottom line.
We firmly believe that these headwinds are in the process of turning around resulting in improvement thus an increased share price.
Taking a closer look at the latest results show this pressure.
The company reported third quarter 2015 revenues of $3.2 billion and net loss attributable to Icahn Enterprises of $440 million, or a loss of $3.40 per depositary unit.
For the third quarter 2014, revenues were $4.4 billion and net loss attributable to Icahn Enterprises was $355 million, or a loss of $2.90 per depositary unit.
Adjusted EBITDA attributable to Icahn Enterprises was a loss of $32 million for the third quarter 2015 compared to a loss of $2 million for the third quarter 2014. Adjusted EBIT attributable to Icahn Enterprises was a loss of $187 million for the third quarter 2015 compared to a loss of $152 million for the third quarter 2014.
For the nine months ended September 30, 2015, revenues were $12.7 billion and adjusted net loss attributable to Icahn Enterprises, after adding back the loss on extinguishment of debt, was $66 million, or a loss of $0.52 per depositary unit. For the nine months ended September 30, 2014, revenues were $15.8 billion and adjusted net income attributable to Icahn Enterprises, after adding back the loss on extinguishment of debt, was $257 million, or $2.14 per depositary unit. For the nine months ended September 30, 2015, net loss attributable to Icahn Enterprises was $67 million, or a loss of $0.53 per depositary unit, as compared to net income attributable to Icahn Enterprises of $105 million, or $0.87 per depositary unit for the nine months ended September 30, 2014.