In a move that surprised the market, multi-billionaire Carl Icahn has been named as special advisor to Donald Trump on overhauling federal regulations.

Trump Advisor

It's time to break free of excessive regulation and "let our entrepreneurs do what they do best: create jobs and support communities," Icahn said.

While 80-year-old Icahn was an early supporter of Trump, the hedge fund manager’s most famous image is that of a Washington outsider and renegade capitalist. Critics of the appointment point out the multiple potential conflicts of interest in simultaneously controlling or owning stock in companies that could be affected by the proposed deregulation.

Investment Strategy

Icahn, who made almost $2 billion from a 3-year Netflix investment, has stated, "My investment philosophy, generally, with exceptions, is to buy something when no one wants it." Majority control enables Icahn to transform a losing company through drastic management and strategy changes. His involvement alone is enough for the company’s share price to rise in anticipation of unlocked shareholder value.

While the strategy appears to have been very successful a few years ago, in the last couple of years the performance of his energy-focused portfolio has slipped as this TipRanks graph shows. A sharp jump from Nov 5, 2016 to Dec 10, 2016 returned Icahn’s fund to performance levels experienced by average hedge fund portfolios. However, the fund, like the average hedge fund portfolio, continues to lag considerably behind the S&P 500. 

So where did Icahn invest in Q3? Were there any surprises for his $19.8 billion portfolio? Based on the most recent 13F forms submitted to the SEC we can investigate Icahn’s latest stock activity. 

Added - Icahn Enterprises (IEP), Herbalife (HLF

Icahn increased his holding in conglomerate Icahn Enterprises by 2.85%. At $6.42 billion, this is the fund’s largest holding as the chart below shows. The holding has so far made a gain since the last quarter of 18.54%. Icahn Enterprises, which is controlled by Carl Icahn, has investments across 10 different business sectors. Most recently the company- whose shares rose on the annoucement of Carl Icahn as Trump’s advisor- agreed to sell its American Railcar Leasing LLC subsidiary for up to $3.36 billion to SMBC Rail Services.

Icahn also upped the holding in global nutrition and weight management company Herbalife by 15.36%. The holding, which has made a loss of 22.34% since the last quarter, now has a value of $1.22 billion. Herbalife has been tussled over by Icahn and rival hedge fund manager Bill Ackman. According to Ackman, who has a $1 billion short bet against Herbalife, the company is an illegal pyramid scheme worth nothing. But by continuing to increase his Herbalife holding, Icahn is demonstrating even more clearly his unwavering support for this controversial company.

Reduced - Allergan (AGN), Nuance Communications (NUAN), CVR Refining (CVRR)

In the last quarter, Icahn significantly reduced his Allergan holding by 87.49% to 425,438 shares worth $97.98 million. Allergen was one of his biggest bets of last year. Since the last quarter, his remaining holding has made a loss of 8.81%. However, the analyst consensus opinion for Allergen, which just bought regenerative medicine unit LifeCell for $2.9 billion, is strong buy according to financial accountability engine TipRanks. 

The fund also made more modest reductions in its Nuance Communications and CVR Refining holdings (by 9.13% and 4.17% respectively).

Sold out - Chesapeake Energy (CHK), Transocean Ltd (RIG)

Icahn sold out his holdings in these two companies which he had already been selling down in previous quarters. The current Chesapeake analyst consensus rating on TipRanks is hold with an average analyst price target of $6.83- nearly a 5% downside from the current share price.

Significant other holdings

Icahn retained significant holdings in the following companies: American International Group (AIG), Cheniere Energy Inc (LNG), Paypal Holdings (PYPL) and Federal-Mogul Corp (FDML).

Check here to see where other top hedge funds are investing.

 

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