Carl Icahn is among the 25 richest people in the United States, with a net worth
estimated to exceed $13 billion. He accumulated his wealth by being an activist investor, acquiring stakes in companies that were performing poorly, then pushing for organizational and administrative changes to unlock hidden shareholder value. Icahn typically buys buying beaten-down assets, restructures the business and then sells the assets for a profit
when they are back in favor.
Icahn is far better at identifying hidden value than the average investor, so most of us could make money just by following his moves.
A case in point is Chesapeake Energy (NYSE: CHK). Icahn acquired a 5.8% stake in this company in December of 2010 and sold a third of his holdings three months later for a $150 million profit. If you had purchased and sold Chesapeake shares when Icahn did, then you could have locked in a nearly 50% return in just three months.
Not every Icahn deal is as successful, of course, but his moves are always worth studying. Here are four stocks the billionaire investor recently added to his portfolio.
1. CVR Energy (NYSE: CVI) -- Initiated position
Icahn recently purchased 3.8 million shares of CVR Energy, a 14.5% stake in the company worth about $71 million.
CVR owns refineries in the Midcontinent United States, which are deeply undervalued, according to Icahn. CVR has a big cost advantage over competitors because its refineries are located near emerging U.S. oil fields where low-cost crude oil from shale rock formations is produced. By paying less for crude supplies, CVR locks in higher profits when converting this fuel into gasoline.
Crack spreads (the difference between oil costs and gasoline prices) for CVR and other Midwestern refiners hit $38 last summer and were much higher than industry average spreads of $25. CVR also benefits from proximity to steadily rising crude supplies such as the Bakken field, where output has tripled in the past three years.
Icahn is offering $2.6 billion, or $30 a share, in a takeover bid for CVR. In fact, he believes bigger oil companies such as Valero (NYSE: VLO) or Marathon Petroleum (NYSE: MRO) might be willing to pay $37 a share for the business.