Our Take on Icahn's Small-Cap Portfolio Since Q4 2011

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With a net worth of $14 billion, infamous corporate raider Carl Icahn has a lifetime of experience building wealth in the capital markets. Each quarter, we’re able to take a glimpse at that experience by reviewing the holdings in his Icahn Capital fund. Our research has shown that hedge funds like his are excellent stock pickers. For example, the most popular small-cap stock positions in hedge fund’s 13F filings outperformed the S&P 500 index by 18 percentage points per year (learn the details here). With that in mind, we’ve grouped together five small-cap stocks that Icahn has maintained in his portfolio since at least Q4 2011.

CVR Energy (NYSE: CVI) sits at the top of our list for a number of reasons. For starters, the stock roughly doubled in value over our analysis period. Secondly, Icahn really loaded into the stock each quarter, pushing his position size up by a whopping 1,760%. In terms of shares, his Q4 2011 filing showed that he owned 3.8 million; by the time of his most recent filing, he had amassed over 71 million, representing 23% of his portfolio. The petroleum refiner posted great EPS every quarter, and we like the huge growth in earnings and revenue year over year. While not as bullish as Icahn, Steve Cohen of SAC Capital recently pushed his share count up by 38% (see his other recent moves here).

Specialty vehicle manufacturer Oshkosh Corporation (NYSE: OSK) was a mainstay in Icahn Capital’s portfolio throughout last year, although the fund kept the same position size each quarter. The $3.4 billion stock was another big performer in the past twelve months, causing Icahn’s unrealized value to increase by 28% for that holding period. On a fundamental note, revenue growth slowed into the negative during this past earnings period versus a year prior however, which we don’t particularly like to see. Billionaire Ken Griffin recently built a $40 million stake in OSK.

Next on our list is The Hain Celestial Group (NASDAQ: HAIN), a health foods and products manufacturer that holds brands like Soy Dream and Terra under its umbrella. The stock made earnings beat after earnings beat in 2012 and has started 2013 with the same strength, recently posting an EPS of $0.72 on the fifth of this month. Going forward, the company has high hopes for many of its organic brands and gave ambitious guidance, with both earnings and revenue estimates exceeding 25% versus fiscal year 2012. Icahn once again kept his position steady at 7.1 million shares but experienced a bump in value due to the stock gaining roughly 50%. Jim Simons holds $55 million in his portfolio.

Navistar International (NYSE: NAV) is another vehicle manufacturer play for Icahn, taking up a roughly 2% portion of his assets. Compared to the rest of the stocks on our list, NAV performed poorly in 2012, undoing some of the heavy gains made by the other small-caps. Each earnings announcement in 2012 brought on negative news, including two misses to the tune of -400% and -750%. Despite NAV’s leading position in the global truck market, we see the stock needing ample time to recover and would advise this only for longer-term portfolios. Billionaire Howard Marks has a debt investment in the company.

Ending our list on a high note, Commercial Metals Company (NYSE: CMC) is a player in the steel industry that returned a double-digit net gain in the past twelve months, nudged along by improved construction demand. Icahn tapered off some of his position during the run-up, owning 11.5 million shares in Q4 2011 but ending Q3 2012 with only 7.9 million. Despite negative earnings and revenue growth as indicated by its most recent quarterly filings, the forward P/E ratio is favorable and the stock enjoys a low price-to-book value. Famed small cap investor Chuck Royce has compiled a $17.3 million position in the stock. 


This article is written by Eric Winter and edited by Meena Krishnamsetty. They don't own shares in any of the stocks mentioned in this article. The Motley Fool recommends Hain Celestial. The Motley Fool owns shares of Hain Celestial. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!

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