In Q4 billionaire hedge fund manager Carl Icahn upped his stake in controversial company Herbalife Ltd.(NYSE:HLF), which he is tussling over with fund manager Bill Ackman, and equipment rental company Herc, while reducing the fund’s billion-dollar Paypal position. 80-year old Icahn is no stranger to controversy: he has recently attracted criticism of an unacceptable conflict of interest in his role as special advisor to President Trump on overhauling federal regulation.
Icahn’s investing strategy is to buy failing companies and try and turn their fortunes around by implementing extreme management and strategy changes. His energy-focused investing choices are certainly unusual and have recently performed poorly with the fund recording a loss for the third straight year in a row. Although performance spiked after Icahn correctly predicted Trump’s election in Nov 2016, the fund’s measured performance (of 26.07%) significantly underperforms both the average hedge fund portfolio (51.7%) and the S&P 500 (81.83%).
Repeated investments in Herbalife has seen Icahn’s stake in the nutrition supplement giant rise to 22.5 million shares worth $1.08 billion. In Q4, Icahn added to his holding by 14.73%. His continued investments in Herbalife prove that Icahn firmly believes that the company is not just a fraudulent pyramid scheme- the accusation of rival fund manager Bill Ackman who made a $1 billion short bet against the company in 2012. So far Ackman has suffered from his position as share prices have risen from about $47 to $60 over the years. However, William Stiritz, one of the largest investors and supporters of Herbalife, did cut his HLF stake in the quarter to 1.4% from 5.2% a year ago.
Herc Holdings Inc
Icahn now has a significant $1.3 billion position in Herc Holdings after he upped his stake by 94.63%. Herc Holdings is a newly independent company with revenues of approx. $1.7 billion that separated from Hertz back in July 2016. “As an independent company, Herc Rentals now has the financial and operational flexibility to pursue strategies that are specific to the equipment rental business” CEO Larry Silber said of the split between the equipment rental and car rental arms of the business. The analyst consensus rating HRI is hold with an average analyst price target of $43.5- a 12.10 downside from the current share price.
Paypal Holdings Inc
Icahn trimmed his Paypal holding by 1.48%- he now holds 33.4 million shares in the online payments provider worth $1.32 billion. Paypal has an impressive strong buy analyst consensus rating on TipRanks based on recommendations published in the last 3 months with an average analyst price target that suggests a potential 15.09% upside from the current share price of $41.96.
Five-star Jefferies analyst Jason Kupferberg reiterated his buy rating on the stock on Feb 9 with a very bullish price target of $52. He gave this positive analysis of Paypal’s outlook: “PYPL remains a Buy-rated Franchise Pick and we view the stock as a scarce asset, due to its combination of robust top-line growth, strong, global brand, secular tailwinds favoring online/mobile/social payments, margin expansion opportunities, and an enviable cash flow/balance sheet profile.”