Invest Better with Icahn
07/09/2013 9:45 am EST
Through this master limited partnership, individuals can literally invest alongside Carl Icahn, the high-profile activist value investor, notes Ian Wyatt of High Yield Wealth.
Carl Icahn, in my opinion, is the greatest value investor of our day. In fact, he may be the greatest value investor of all time.
Icahn hasn't quite reached Warren Buffett's wealth status-Buffett is fourth on the Forbes 400, with an estimated $53.5 billion net worth. But Icahn's $20 billion estimated net worth is no chump change, and places him 26th on that list.
Much of Icahn's success is attributable to concentrated value investing, but with a twist. Icahn actively agitates for improvement. He's an instigator who speeds the process along.
He's used his powerful name and world-class connections as an activist investor to extract value from numerous companies, including RJR Nabisco, Texaco, Western Union, Time Warner (TWX), and most recently, Herbalife (HLF).
Typically, investing with a top player like Icahn requires a minimum hedge-fund investment of $500,000. But for around $70, you can actually invest alongside Icahn in Icahn Enterprises (IEP), his publicly traded master limited partnership, where the shareholders ("unitholders," technically) are literally partners with Icahn.
Icahn Enterprises is both an investment vehicle and a conglomerate with wholly owned businesses. It is the majority owner of CVR Energy, a refiner and fertilizer producer; Federal-Mogul, an auto-parts supplier; American Railcar, which sells and leases railroad cars; and Tropicana Entertainment, the casino operator.
It also owns all of PSC Metals, a processor of scrap metal, and WestPoint International, a maker of home textiles. Plus, investors get exposure to Icahn's high-profile activist investments in stocks like Chesapeake Energy, Transocean, Herbalife, and Dell.
Deeply depressed prices are an outgrowth of trouble, and Icahn likes trouble in spades. The more troubling a company appears to most everyone else, the better it looks to Icahn.
For example, over the past five months, Icahn has been in a heated battle over the value of nutritional supplement seller Herbalife with fellow billionaire and hedge-fund manager Bill Ackman. Ackman views Herbalife as a pyramid scheme, while Icahn believes Herbalife is a financially sound, legitimate business.
The bottom line is that through Icahn Enterprises, individuals can literally invest alongside him. You invest when he invests, not a month or two later after the price run-up that invariably occurs after his positions are revealed to investors in SEC schedule 13-D.
Just as important, Icahn's interests are aligned with the partners. Icahn personally owns 89% of the units in Icahn Enterprises (and takes only $1 in annual salary).
It's worth noting that Icahn Enterprises recently announced a 25% quarterly distribution increase, to $1.25 per unit from $1. What's more, I wouldn't be surprised to see it supplemented with special distributions.
At a time when many investors are placing money with high-fee hedge funds and receiving mediocre returns, Icahn Enterprises offers a tremendous opportunity for retail investors to invest with the very best.
What's more, you can invest at a discount: Icahn Enterprises units trade at a slight discount to their asset value.
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