Best Investments: How These Investors Got 20% Annual Gains for a Decade

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When billionaire and corporate raider Carl Icahn gets involved in a stock, the share price often skyrockets – known as the "Icahn Effect," or "Icahn Lift."

The activist investor's recent involvement in Dell Inc. (Nasdaq: DELL), Herbalife Ltd. (NYSE: HLF) and Transocean Ltd (NYSE: RIG) have propelled shares higher.

That's why investors often follow his lead into these stocks, hoping to get a piece of the resulting gains.

But there's another way to profit from Icahn's investing prowess. Investors who took this route have scored 20% annual gains for a decade.

We're talking about investing in Icahn's $6 billion master limited partnership, Icahn Enterprises LP (NYSE: IEP).

How to Profit from Icahn's Best Investments

IEP invests in rail cars, retail, gaming and energy. Shares got off to a stellar start this year. Beginning 2013 at $47.41, shares have soared some 39% to $65.96.

Thanks to a positive Barron'sfeature over the weekend, shares have climbed more than 18% this week.

Shares have logged a 40.3% increase since April 2012, versus a 15.5% rise for the Standard & Poor's 500 Index.

Its decade of impressive increases made it a better performer than Warren Buffett's highly revered Berkshire Hathaway Inc. (NYSE: BRK.A, BRK.B), and investment companies Loew's Company Inc. (NYSE: L) and Leucadia National Corp. (NYSE: LUK).

Barron's thinks shares are undervalued when you look at the value of the company's holdings.

Explaining his strategic investments, Icahn told Barron's, "There are many companies that are undervalued and badly managed. There's great profit in controlling them or making changes. Icahn Enterprises is uniquely positioned to do that because we have permanent capital. We're able to take advantage of opportunities in undervalued companies that others can't do."

Icahn's successful bets have helped him accumulate net worth estimated at $18.6 billion, for a 38th spot on the list of the world's wealthiest.

The company's biggest position at 82%, or $3.6 billion, is its best performer, CVR Energy Inc. (NYSE: CVR). IEP bought shares of the oil-refining and fertilizer company last May at $30. Shares are currently changing hands at $50, for a gain of $1.4 billon.

IEP's second largest holding is Icahn Capital, the famous investor's $6 billion hedge fund. Year-to-date, Icahn Capital is up 12%. Since 2004, it's up a whopping 200%.

Among other substantial holdings: a 77.6% stake in component maker Federal Mogul Corp. (Nasdaq: FDML), worth $460 million; a 70.8% stake in plastic casing Viskase Companies Inc. (VKSC), valued at $268 million; a 67.9% stake in casino operator Tropicana Entertainment Inc. (Nasdaq: TPCA) worth $488 million; and a 55.6% stake in American Railcar Industries Inc. (Nasdaq: ARII) valued at $523 million.

A bonus to investing in IEP: It pays a healthy 7% dividend yield, letting investors profit while they watch Icahn make his next move.

For more of the best investments that offer a piece of the Icahn fortune, check out our recent report: Watch What Carl Icahn Does to These Energy Stocks.

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