The second quarter of 2014 has been among Carl Icahn’s stronger showings, as his sometimes loud brand of activist investing delivered for investors again.
Carl Icahn’s fund delivers 10.7% in 2Q
Icahn had a difficult first quarter, as Icahn Enterprises LP (NASDAQ:IEP) fell by 0.4 percent. The second quarter of 2014, however, saw Icahn’s fund deliver 10.7 percent, according to comments made by Icahn Enterprises Chief Financial Officer SungHwan Cho, reported in Forbes.
Icahn had losses in the first quarter that now appear as wins. This includes his investment in eBay which, after reaching a high near $60 per share in early march, fell below $50 in June and has recently rebounded. Icahn initially appeared to lose a fight to spin off PayPal and influence the board of directors.
Icahn’s much celebrated battle regarding Herbalife Ltd. (NYSE:HLF) hasn’t been a strong performer on the year either. The stock was trading near $80 per share at the start of the new year, and recently tested support near the $50 range.
Apple, a big winner for Icahn’s portfolio
A big winner in Icahn’s portfolio was Apple Inc. (NASDAQ:AAPL) – a stock that was on front page business news in 2014 due to Icahn’s aggressive involvement. Apple’s stock is up more than 21 percent in the second quarter. Icahn had the good sense to buy a good stock on a drawdown when it showed weakness near the end of January, trading around $72 and investing nearly $500 million, and its been off to the races since then. Another positive for his portfolio was a 9.4 percent stake in Family Dollar Stores, Inc. (NYSE:FDO) stores, which agreed to be purchased by Dollar Tree, Inc. (NASDAQ:DLTR) recently.
The most interesting fact regarding Icahn’s market outperformance is that he is beating the S&P 500 while the portfolio is hedged against risk. Hedge fund managers typically say their performance cannot be accurately benchmarked to the broad stock indices because they invest in market “protection,” which typically costs money to “insure” and diminishes profitability of a fund.
Incredibly the fund only has a net long exposure of 39 percent, according to the report. Even long / short hedge funds, designed to hedge, typically have long exposure in the 70 to 80 percent range.
“We are very pleased with these returns given the negative impact that our hedging activities have had on performance,” Keith Cozza, an Icahn investment manager, was quoted as saying in the report. “Without giving effect to our hedges, our long-only positions increased by 17% for the quarter.”