BALTIMORE (Stockpickr) -- If there's any certainty about the last couple months of market activity, it's been that volatility is on the uptick, and uncertainty rules. But it's time like these that it can pay to follow the sage moves of some of the big money names; the investors who've made billions by staying one step ahead of the markets. Far and away, large investors have been upping their cash positions and selling off underperforming stakes, but they've also been surgically buying new positions amid lower valuations.
This week, we're analyzing Carl Icahn's portfolio to see why he picked up shares of
in the last quarter.
Icahn has long been a famed Wall Street personality and a resolute activist investor. After leaving his job as a registered rep at Dreyfus (now part of
) to start his own brokerage firm in 1968, Icahn soon realized that taking control positions in companies he was invested in allowed him to impart his business acumen on management.
That's why it's worth noting when Carl Icahn
One stock that's getting that treatment is
, the sole new position in Icahn Capital's
. Chesapeake is a natural gas producer that owns interests in more than 44,000 wells in the U.S. through partnerships and joint ventures with some of the largest names in the energy exploration business.
Who Else Owns Chesapeake?
T. Boone Pickens
The biggest trend in Chesapeake's business is the increased focus on shale. At present, the company is one of the largest owners of shale acreage in the world. That domination has come at a high cost, though, as management sold off assets and undertook partial stakes in some properties in hopes that heavy bets on shale would pay off for investors. Industry-high leverage is one of the byproducts of that growth, but that leverage remains manageable under the company's current cash flow scenarios.
As the financial markets continue to improve, the ability of Chesapeake's management to refinance that debt should improve in kind. And with a shareholder like Carl Icahn taking a stake in the company, it's likely that Chesapeake will have a strong advocate on its side as it approaches that process.
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One of the most notable stake increases on Carl Icahn's plate is
, the biotech company that the billionaire investor sunk $308 million in last quarter. The reason for the stake increase wasn't surprising to investors familiar with Icahn's motives; he was vying to put his people on the company's board. That posed a potential conflict with Genzyme's management, who were at odds with Icahn's nominees.
But the potential drama ended earlier this month when Icahn made a deal with Genzyme's management team, endorsing management's board nominees in exchange for two board seats for his own appointees.
Who Else Owns Genzyme?
In the biotech sector, Genzyme benefits from a wide economic moat thanks to its rare disease drugs, which provide the company with wide margins that would cost competitors significant amounts in R&D to emulate. And with attractive new offerings in the pipeline, this stock stands to impress investors such as Icahn who are betting on an uptick in drug sales.
With a compromise reached, expect Icahn's voice in Genzyme to help the company's strategic direction over the next couple of years.
Communications technology giant
is another of the companies that Icahn's fund is increasing its stake in; his holdings of the company increased $167 million in the last quarter. At present, Icahn's stake sits at an impressive 7.6%.
As with Genzyme, however, Icahn's ownership stake in Motorola hasn't come without contentious relations with company management. In April, Icahn and Motorola came to an agreement over the latter's board, putting two of Icahn's associates in Motorola board seats and dismissing pending litigation between them.
Who Else Owns Motorola?
Dodge & Cox
NWQ Investment Management
Once the dominant power in mobile handsets, Motorola has faced significant setbacks against heightened competition in the smartphone business. For that reason, the company is splitting up its operating groups, teaming up its cash-generating cable box business with the subsidy-demanding mobile handset business. The move also frees up the Motorola handset business as a potential acquisition target. Motorola's management has agreed to consult with Icahn on the restructuring.
One of the hallmarks of Icahn's investment strategy has been a willingness to pick up stakes in small-cap stocks like
, a small game developer that he currently owns 11.3% of. Take-Two is responsible for some of the most compelling and controversial games on the market, and some of the most profitable.
Despite its small size, Take-Two has managed to compete successfully against larger challengers, something that's particularly important as the company delves into the sports game business through exclusive agreements with Major League Baseball.
The biggest change in Take-Two's business right now looks to be the divestiture of its distribution operation, a business that has taken attention away from the significantly more profitable game development business. With a strong talent pool in play, Take-Two should continue to succeed financially under its new format.
Take-Two isn't Icahn's only stake in a small-cap entertainment stock. He also owns a 19% stake in
Lions Gate Entertainment
, a diversified studio with a hand in everything from feature films to television programming. As with many of the company's he's betting on this year, Icahn is waging a battle against LGF's management -- in this case attempting to stage a hostile takeover of the company.
Icahn is offering $7 per share to buy out the company (which recently traded for $6.95 in Tuesday afternoon trading) and is expecting to become a "a much larger shareholder," according to
The Wall Street Journal
To see the rest of Carl Icahn's
, check out his
-- Written by Jonas Elmerraji in Baltimore.
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Jonas Elmerraji is the editor and portfolio manager of the
Rhino Stock Report
, a free investment advisory that returned 15% in 2008. He is a contributor to numerous financial outlets, including
, and has been featured in
Investor's Business Daily