After making up with Bill Ackman, Carl Icahn could be licking his activist wounds to a certain degree. The fund manager with among the loudest hedge fund voices might have found a little difficulty as of late, but should investors consider buying this stock on drawdown?
Icahn reported a slight earnings miss yesterday. Revenue for the quarter was $5 billion, slightly under the street number of $5.4 billion. But what wasn’t on the financials was a significant trading risk and a slight speed bump in the intimidation column. On May 5, Icahn shareholders were granted a quarterly distribution in the amount of $1.50 per depositary unit.
Since the financial crisis, Warren Buffett's Berkshire Hathaway has had significant exposure to financial stocks in its portfolio. Q1 2021 hedge fund letters, conferences and more At the end of March this year, Bank of America accounted for nearly 15% of the conglomerate's vast equity portfolio. Until very recently, Wells Fargo was also a prominent Read More
Could Herbalife fall to zero in a flash as Ackman suggests?
The famous Herbalife Ltd. (NYSE:HLF) battle between Ackman’s short and Icahn’s long may have come close to the “big o” moment for Ackman’s strategy: Herbalife flash crashing to zero. This is what Ackman said could happen, as one outcome on his probability table is the stock moves quickly, in a flash, to have little if any value.
Icahn: Original sin in Ackman’s eyes is not paying on a deal
This disagreement only slightly overshadows the original sin: When starting out, Icahn stiffed Ackman’s fund to the tune of approximately $5 million. Ackman recently called Icahn to tell him that he accepted his apology. I always thought it worked by someone saying they were sorry first, then accepting the apology, but Emily Post was unavailable to referee the issue.
“We are fully wedded to the activist model across all of our segments,” Icahn reassured. “This strategy has served us well over the last 14 years and we expect to continue this trend long into the future. While the first quarter produced somewhat modest results compared to the standards we hold out for ourselves, we believe that the second quarter is off to a great start with preliminary unaudited estimated adjusted net income attributable to Icahn Enterprises of over $200 million for April.”
If Ackman is correct, Herbalife Ltd. (NYSE:HLF) could suddenly drop to zero if regulatory screws come down and end or curtail the company’s livelihood. Risk managers might call this catastrophic loss on in trade – a legal flash crash in a stock caused by Ackman’s own brand of regulatory activism. After dealing with Herbalife and a less than hoped for result in eBay, shares traded down only slightly, just under 3%, as a scrappy hedge fund trader such as Icahn might be considered a good investment on a drawdown.