giofranchi Posted August 15, 2012 Share Posted August 15, 2012 I have read an article in the FT about Brett Ichan, son of Carl Ichan. He is just 33, but already seems to be a very accomplished businessman: his father put him in charge of managing a capital of $3 billions, after he doubled in a few years the first $300 millions he was responsible for. Not bad at all for someone so young! Of course Ichan Enterprises can boast a stellar track record, and it is selling at 0,9 x book value. So, it is very appealing to me right now. Carl Ichan is undoubtedly one of the best capital allocator ever, but I am not sure how long he can go on doing such a great work (he is already 76 years old). Anyway, if the son Brett is (almost) as good as the father Carl, that could mean that the Ichan family will go on compounding capital for themselves and for their shareholders a very long time. And that is the first thing a need to know, if I am to invest my firm’s capital: to partner with the best capital allocators... for a very, very long time! As you can see in the file attached, Ichan Enterprises seems heavily indebted: total debt (more or less $8 billions) is almost 200% of shareholders’ equity. Also liquidity (more or less $6 billions) is very high. So, net debt ought to be just 50% shareholders’ equity… Anyway, IEP seems to work with a lot of debt. And that is something I am always uncomfortable with. Anyone knows IEP well? Could someone tell me the meaning of all that debt? Is it a red flag, like it usually is, or, in the hands of the Ichan family, could it really be just a lever to boost results? Most of all, why such an high debt with also such an high liquidity? Does it mean that the Ichan family foresees huge opportunities in the market to come soon? Thank you very much, giofranchi IEP_2012_Q2_Webcast.pdf Link to comment Share on other sites More sharing options...
17thstcapital Posted August 15, 2012 Share Posted August 15, 2012 As you can see in the file attached, Ichan Enterprises seems heavily indebted: total debt (more or less $8 billions) is almost 200% of shareholders’ equity. Also liquidity (more or less $6 billions) is very high. So, net debt ought to be just 50% shareholders’ equity… Anyway, IEP seems to work with a lot of debt. And that is something I am always uncomfortable with. Anyone knows IEP well? Could someone tell me the meaning of all that debt? Is it a red flag, like it usually is, or, in the hands of the Ichan family, could it really be just a lever to boost results? Most of all, why such an high debt with also such an high liquidity? Does it mean that the Ichan family foresees huge opportunities in the market to come soon? IEP is not at all as leveraged as you may think. It's a holding co and so the debt of all the portfolio companies is consolidated on the IEP balance sheet. Holdco debt, which I've owned in the past, is very well covered by all the assets (investments in the fund, Railcar, Federal Mogul, cash, etc) at the holdco and IEP holdco bonds now trade well above par suggesting that the market believes that there's no solvency risk. Also note that portfolio company debt is non recourse to the holdco. Link to comment Share on other sites More sharing options...
Guest hellsten Posted August 15, 2012 Share Posted August 15, 2012 Thanks for posting. I had a quick look at IEP. Interesting company: Since inception in November 2004, the Investment Funds' gross return is 172%, representing an annualized rate of return of 14% through June 30, 2012. IEP has applied a disciplined fiscal investment approach with a commitment towards substantial liquidity. The Company has maintained ample liquidity in order to execute investment decisions quickly without financing contingencies, thereby taking advantage of investment opportunities and growing shareholders’ equity. Carl Icahn plus $5.3 billion in liquid assets sounds good to me… However, BVPS growth has not been very good. BVPS was $25 in 2002 and $43 in 2011. Share count has grown from 57 million in 2002 to 99 million… This makes me sceptical about investing my money with Carl Icahn and his sons. To me he seems like the type that's more interested in making his family rich than making shareholders rich. I'm no expert on Carl Icahn, so I might be completely wrong. IEP is up 333% since July, 2002… Giofranchi, I've noticed you seem to like good capital allocators. Which ones do you follow and do you have any favorites? Link to comment Share on other sites More sharing options...
giofranchi Posted August 16, 2012 Author Share Posted August 16, 2012 Giofranchi, I've noticed you seem to like good capital allocators. Which ones do you follow and do you have any favorites? hellsten, I firmly believe in what Charles Munger said: "I don’t think General Motor should have wiped out the shareholders. That was a huge failure of management. If you think about it, Berkshire is a collection of failed businesses, that are gone. And here it is, this wonderful thriving place! As our businesses failed, our shareholders did not fail. We adapted. We took the money out of the failing businesses and bought other businesses. General Motors did not pass that test. They destroyed their shareholders…" Among “owner-operated” companies I am particularly interested in those company in which the owner/manager has the culture and the capability to shift capital among different sectors and different industries, on an opportunistic basis, and when it is necessary to do so. I don’t really like the fund of funds idea, just because I see one great weakness in the mutual/hedge fund industry: they do not work with permanent capital. Take, for instance, Bruce Berkowitz: he suffered significant shareholders funds redemptions last year. And he was forced to trim his positions in investments that probably will turn out to be very good choices in a few years. Instead, if he had permanent capital to work with, he probably would have increased those positions, not lessen them! For a value investor, being potentially subjected to funds redemptions is a very big minus! Because they always arrive at the worst time possible! I also believe that we are living through a secular bear market in equities that started in 2000 and still has some years to go. So, I like to partner with owners/managers who think and act defensively and who are at the helm of companies that do not suffer too much during bear markets. The insurance industry embodies all these characteristics. That’s why a reckon Mr. Watsa the best choice for years to come. I also like Mr. Einhorn very much: hey! He ended the Poker World Series in Las Vegas in third position just a few months ago! Who wouldn’t like to partner with someone so shrewd?! FFH is by far my firm’s largest investment, and GLRE is the second largest. I would also like to invest in MKL, but I am waiting for better prices. Event driven value investing is something I also like right now: the opportunity to have results not correlated to the general market. Daniel Loeb is a manager I like and TPOU (London Stock Exchange) is my firm’s third largest investment. Control value investing, as far as I am concerned, offers the same kind of uncorrelated opportunity: Sardar Biglari has proved to be a shrewd businessman, and my firm has a (still relatively small) investment in BH. This is also the reason why I am interested in IEP. The whole developed world is still burdened by too much debt, and my idea is that high yield opportunities in the credit market will soon ensue. Howard Marks is one of the best manager to act opportunistically in this area. Therefore, my firm has a substantial investment in OAK. I also like “real assets”: they could prove to be good hedges against inflation. FFH is the best hedge I know against deflation. Looking for an hedge against inflation, I think that “real assets” are the best choice: BAM and LUK are both in my firm’s portfolio. Finally, I like L and BWP, a MLP which pays all its earnings to owners. 17thstcapital seems to know IEP very well and I would like to know what he thinks about the increase in share outstanding hellsten rightly pointed out. Someone else I would really like to hear about “the best allocator of capital” is surely ValueDan38. He has been investing with them for 22 years now and must have accumulated a huge experience! giofranchi Link to comment Share on other sites More sharing options...
Ross812 Posted August 16, 2012 Share Posted August 16, 2012 My favorite capital allocator is Brian Joffe at Bidvest. I have had 30% of my portfolio with him since the Spring of 2009. I see Bidvest as the Nestle of the developing world with a capital allocator that plows free cash flow into existing businesses that veriticaly integrate to increase the margins accross the entire conglomerate. Link to comment Share on other sites More sharing options...
beerbaron Posted August 16, 2012 Share Posted August 16, 2012 My favorite capital allocator is Brian Joffe at Bidvest. I have had 30% of my portfolio with him since the Spring of 2009. I see Bidvest as the Nestle of the developing world with a capital allocator that plows free cash flow into existing businesses that veriticaly integrate to increase the margins accross the entire conglomerate. I like bidvest but not cheap las time I checked. BeerBaron Link to comment Share on other sites More sharing options...
Ross812 Posted August 16, 2012 Share Posted August 16, 2012 My favorite capital allocator is Brian Joffe at Bidvest. I have had 30% of my portfolio with him since the Spring of 2009. I see Bidvest as the Nestle of the developing world with a capital allocator that plows free cash flow into existing businesses that veriticaly integrate to increase the margins accross the entire conglomerate. I like bidvest but not cheap las time I checked. BeerBaron Its trading at P/E of 17.8 right now with the exchange rate of ZAR to USD of 8.22. I usually try to buy at 13x or less. I think the rand should fluctuate around an exchange rate of 7. Bidvest being denominated in Rands allows for some interesting price movement in the stock with all the money printing going on globally. I would buy some more Bidvest stock at 42.50 or less representing 13x earnings assuming a 7.2 exchange rate. The annual report is due at the end of the month. We will see what the buy price moves to... Link to comment Share on other sites More sharing options...
giofranchi Posted August 16, 2012 Author Share Posted August 16, 2012 Ross812, thank you very much for your idea! I am ashamed to admit that I did not know Brian Joffe before. But I will immediately check Bidvest out. And I won't miss the A.R., as soon as it is published! giofranchi Link to comment Share on other sites More sharing options...
Guest hellsten Posted August 16, 2012 Share Posted August 16, 2012 Giofranchi, I've noticed you seem to like good capital allocators. Which ones do you follow and do you have any favorites? Among “owner-operated” companies I am particularly interested in those company in which the owner/manager has the culture and the capability to shift capital among different sectors and different industries, on an opportunistic basis, and when it is L, WTM, Y, LUK, BRK, FFH and MKL all seem to have the corporate culture needed for long-term profits. IMHO, BAM and GLRE still have to prove themselves. And you shouldn't forget CHK… Bidvest, TPOU, OAK and IEP are certainly interesting too. Up-and-coming capital allocators, for example, RNK, FTP and HOTR also look interesting. Link to comment Share on other sites More sharing options...
ValueDan38 Posted August 16, 2012 Share Posted August 16, 2012 giofranchi, I also have thought (since early 2001) that we are in a secular bear market beginning in 2000, which could last 10 – 20 years. But we have remained mostly in equities, since there are always pockets of value if you can take the short-term volatility. Many of which I consider “the best allocators of capital” appear to be very unpopular and are on sale at relatively favorable prices. My large holdings of BRK, FFH and LUK are now selling close to book value, which is near the lows of their historical ranges. I intend to mostly concentrate on what I consider to be my best current ideas. But, other ideas mentioned on our board also appear, IMHO, to be interesting at the right price: IEP, BAM - Currently concerned about leverage in this environment. Could be great buys near the beginning of the next bull market. GLRE, BH - If you can tolerate the gurus’ share of the gains. Bidvest - I have been intrigued for many years, but have never researched in depth. Maybe Ross812 can elaborate more on his reasons for holding a major position. MKL, L, Y, etc. - Appear very good, but are they great? We could all benefit from sharing our best ideas on “owner-operated” companies and our detailed reasons for considering them. Dan Link to comment Share on other sites More sharing options...
giofranchi Posted August 17, 2012 Author Share Posted August 17, 2012 MKL, L, Y, etc. - Appear very good, but are they great? I like MKL. They are very good underwriter (with the exception of 2000 and 2001, their combined ratio has always stayed around 100% or below), and they achieved a 17% CAGR in book value for the past 20 years. And the way Tom Gayner invests is very conservative: 17% CAGR and the possibility to sleep well at night! What’s not to like?! If MKL trades closer to book value, I will buy some shares. Of Loews Corp. I like the price very much right now. It is selling for 0,82 x book value, which of course means that you are getting 18% of the present value and any future growth for free. This seems ridiculous to me! In their last annual letter to shareholders the Tisch family wrote: “Over the past 50 years, the price of Loews common stock has grown at an average annual rate of approximately 14%, compared with an approximate 6% growth rate for the S&P 500.” I know that in the last decade growth might have slowed down considerably; anyway, you shouldn’t be supposed to get completely for free the future growth of a company that has grown much faster than the S&P500 for 50 years! I also like the big liquidity they keep, to be able to seize opportunity, when it presents itself. Because I believe that in the months and years ahead there will be a lot of outstanding opportunities. giofranchi Link to comment Share on other sites More sharing options...
racemize Posted January 1, 2013 Share Posted January 1, 2013 Did Icahn write shareholder letters/does anyone have them? Link to comment Share on other sites More sharing options...
compoundinglife Posted January 3, 2013 Share Posted January 3, 2013 Thanks for posting. I had a quick look at IEP. Interesting company: Since inception in November 2004, the Investment Funds' gross return is 172%, representing an annualized rate of return of 14% through June 30, 2012. IEP has applied a disciplined fiscal investment approach with a commitment towards substantial liquidity. The Company has maintained ample liquidity in order to execute investment decisions quickly without financing contingencies, thereby taking advantage of investment opportunities and growing shareholders’ equity. Carl Icahn plus $5.3 billion in liquid assets sounds good to me… However, BVPS growth has not been very good. BVPS was $25 in 2002 and $43 in 2011. Share count has grown from 57 million in 2002 to 99 million… This makes me sceptical about investing my money with Carl Icahn and his sons. To me he seems like the type that's more interested in making his family rich than making shareholders rich. I'm no expert on Carl Icahn, so I might be completely wrong. IEP is up 333% since July, 2002… Giofranchi, I've noticed you seem to like good capital allocators. Which ones do you follow and do you have any favorites? They did a unit offering in 2011, each unit got 0.16 of a right to buy at $36.70. In some cases have paid a portion of the dividend in units. Don't know off the top of my head how much this accounts for the increase in shares outstanding. %97 of the units are owned by insiders. Link to comment Share on other sites More sharing options...
mhdousa Posted January 4, 2013 Share Posted January 4, 2013 Anyone have any idea why this has moved up so much recently (20 percent in the last few days)? Link to comment Share on other sites More sharing options...
constructive Posted January 7, 2013 Share Posted January 7, 2013 IEP got a full article a few days ago in Kiplinger's. That could be enough to do it given the tiny float. http://www.kiplinger.com/magazine/archives/carl-icahn-better-than-warren-buffett.html Link to comment Share on other sites More sharing options...
Palantir Posted January 7, 2013 Share Posted January 7, 2013 Can you please change the title to "Icahn Enterprises". The typo is bothering this OCD poster..... Link to comment Share on other sites More sharing options...
Hawk4value Posted January 10, 2013 Share Posted January 10, 2013 Finally, I like L and BWP, a MLP which pays all its earnings to owners. Gio, I have had a position in L since 2009 and would like to possibly establish a position in BWP for its income generating (and tax deferral) capacity. I have been researching MLPs (but not BWP specifically yet) in general and am concerned with general partner IDRs. In this case since I own L which is also the general partner for BWP, I would benefit from any IDRs paid to L. When you mentioned that BWP is an MLP which pays "ALL" its earnings to owners, do you mean there are no IDRs?? Thanks. Link to comment Share on other sites More sharing options...
giofranchi Posted January 10, 2013 Author Share Posted January 10, 2013 Finally, I like L and BWP, a MLP which pays all its earnings to owners. Gio, I have had a position in L since 2009 and would like to possibly establish a position in BWP for its income generating (and tax deferral) capacity. I have been researching MLPs (but not BWP specifically yet) in general and am concerned with general partner IDRs. In this case since I own L which is also the general partner for BWP, I would benefit from any IDRs paid to L. When you mentioned that BWP is an MLP which pays "ALL" its earnings to owners, do you mean there are no IDRs?? Thanks. Hi Hawk4value, what I meant is just that their net income during the first 9 months of 2012 has been $0.99 per common units and they paid out $1.595 per common units (see file in attachment). Reconciliation is very easy and straightforward: from net income you calculate EBITDA, summing depreciation and amortization, then from EBITDA you just subtract cash paid for interest and maintenance capital expenditure. That’s all it takes to get from net income to distributable cash flow. Of course, there are also class B units, which receive distributions as well: during the first 9 months of 2012 each class B unit received a $0.9 distribution. During the first 9 months of 2012, net income was $217 million, distributable cash flow was $354 million, they distributed $319 million, $298 million to common units, and $21 million to class B units. Hope this helps, giofranchi BWP_Q3-12_Earnings_Release_Final1.pdf Link to comment Share on other sites More sharing options...
Guest hellsten Posted February 12, 2013 Share Posted February 12, 2013 IEP up ~75% since Christmas 2012. Icahn Enterprises must have received some nice Christmas presents. Gio, hope you bought in August :) Link to comment Share on other sites More sharing options...
giofranchi Posted February 13, 2013 Author Share Posted February 13, 2013 IEP up ~75% since Christmas 2012. Icahn Enterprises must have received some nice Christmas presents. Gio, hope you bought in August :) hellsten, unfortunately, I have just been sucking my thumb like a perfect idiot on this one… >:( I was concerned about the debt on the balance sheet, and I chose to invest in MKL and TPOU instead… Both of which have done well until now, but they are far underperforming IEP… Right now at 1.51 x BV, IEP has closed the gap with BRK market valuation, and I think it is trading at fair price. Instead, TPOU is still trading at a discount to NAV. Anyway, IEP stays on my radar, and I hope I will get a good entry point again in the future. :) giofranchi “As time goes on I get more and more convinced that the right method in investment is to put fairly large sums into enterprises which one thinks one knows something about and in the management of which one thoroughly believes. It is a mistake to think that one limits one’s risk by spreading too much between enterprises about which one knows little and has no reason for special confidence.” - John Maynard Keynes Link to comment Share on other sites More sharing options...
Guest hellsten Posted March 1, 2013 Share Posted March 1, 2013 http://www.streetinsider.com/Equity+Offerings/Icahn+Enterprises+L.P.+(IEP)+on+Sale+Following+Equity+Pricing/8146526.html Carl Icahn's Icahn Enterprises L.P. (Nasdaq: IEP) is trading down 12 percent after the company announced that its registered public offering of 3,174,604 shares of depositary units representing limited partner interests in Icahn Enterprises, has been priced at $63.00 per depositary unit. … The firm said they will use proceeds from the offering for general corporate purposes. General corporate purposes :) http://www.streetinsider.com/Hedge+Funds/Icahn+Adds+Up+%24230M+to+War+Chest+to+Squeeze+Ackmans+Brains+Out+in+Herbalife+%28HLF%29/8146858.html Mr. Icahn seems hellbent on helping the markets in this case. While he won't admit it publicly, Mr. Icahn's trade in Herbalife appears to have little to do with the fundamentals of the company - as he claims - and more about getting Ackman's head on a spike. Overnight, Icahn put the odds a little more in his favor after raising over $200 million for his Icahn Enterprises, L.P. (NYSE: IEP) fund. He sold 3,174,604 shares of depositary units at $63. He may raise another $30 million if underwriters exercise the over-allotment. $230 million = 5.6 million Herbalife shares. Of course, he could buy on margin and get even more. These could be the figures going through Ackman's head today on the news. Link to comment Share on other sites More sharing options...
giofranchi Posted April 14, 2013 Author Share Posted April 14, 2013 Carl Icahn Guest Lecture At Yale University: http://www.gurufocus.com/news/216383/carl-icahn-guest-lecture-at-yale-university giofranchi “As time goes on I get more and more convinced that the right method in investment is to put fairly large sums into enterprises which one thinks one knows something about and in the management of which one thoroughly believes. It is a mistake to think that one limits one’s risk by spreading too much between enterprises about which one knows little and has no reason for special confidence. One’s knowledge and experience is definitely limited and there are seldom more than two or three enterprises at any given time which I personally feel myself entitled to put full confidence.” - John Maynard Keynes Link to comment Share on other sites More sharing options...
muscleman Posted April 15, 2013 Share Posted April 15, 2013 http://www.streetinsider.com/Equity+Offerings/Icahn+Enterprises+L.P.+(IEP)+on+Sale+Following+Equity+Pricing/8146526.html Carl Icahn's Icahn Enterprises L.P. (Nasdaq: IEP) is trading down 12 percent after the company announced that its registered public offering of 3,174,604 shares of depositary units representing limited partner interests in Icahn Enterprises, has been priced at $63.00 per depositary unit. … The firm said they will use proceeds from the offering for general corporate purposes. General corporate purposes :) http://www.streetinsider.com/Hedge+Funds/Icahn+Adds+Up+%24230M+to+War+Chest+to+Squeeze+Ackmans+Brains+Out+in+Herbalife+%28HLF%29/8146858.html Mr. Icahn seems hellbent on helping the markets in this case. While he won't admit it publicly, Mr. Icahn's trade in Herbalife appears to have little to do with the fundamentals of the company - as he claims - and more about getting Ackman's head on a spike. Overnight, Icahn put the odds a little more in his favor after raising over $200 million for his Icahn Enterprises, L.P. (NYSE: IEP) fund. He sold 3,174,604 shares of depositary units at $63. He may raise another $30 million if underwriters exercise the over-allotment. $230 million = 5.6 million Herbalife shares. Of course, he could buy on margin and get even more. These could be the figures going through Ackman's head today on the news. I think issuing shares at an overpriced level INCREASES the shareholder value, isn't it? He gets a lot of cash with minimal dilution, so the per share intrinsic value is higher, and then he can use the proceeds for investing to make even more money for shareholders. The fact that IEP is issuing shares at $63 keeps me await from it for now. If it goes down to below intrinsic value, then this could be very interesting. Link to comment Share on other sites More sharing options...
compoundinglife Posted April 15, 2013 Share Posted April 15, 2013 http://www.streetinsider.com/Equity+Offerings/Icahn+Enterprises+L.P.+(IEP)+on+Sale+Following+Equity+Pricing/8146526.html Carl Icahn's Icahn Enterprises L.P. (Nasdaq: IEP) is trading down 12 percent after the company announced that its registered public offering of 3,174,604 shares of depositary units representing limited partner interests in Icahn Enterprises, has been priced at $63.00 per depositary unit. … The firm said they will use proceeds from the offering for general corporate purposes. General corporate purposes :) http://www.streetinsider.com/Hedge+Funds/Icahn+Adds+Up+%24230M+to+War+Chest+to+Squeeze+Ackmans+Brains+Out+in+Herbalife+%28HLF%29/8146858.html Mr. Icahn seems hellbent on helping the markets in this case. While he won't admit it publicly, Mr. Icahn's trade in Herbalife appears to have little to do with the fundamentals of the company - as he claims - and more about getting Ackman's head on a spike. Overnight, Icahn put the odds a little more in his favor after raising over $200 million for his Icahn Enterprises, L.P. (NYSE: IEP) fund. He sold 3,174,604 shares of depositary units at $63. He may raise another $30 million if underwriters exercise the over-allotment. $230 million = 5.6 million Herbalife shares. Of course, he could buy on margin and get even more. These could be the figures going through Ackman's head today on the news. I think issuing shares at an overpriced level INCREASES the shareholder value, isn't it? He gets a lot of cash with minimal dilution, so the per share intrinsic value is higher, and then he can use the proceeds for investing to make even more money for shareholders. The fact that IEP is issuing shares at $63 keeps me await from it for now. If it goes down to below intrinsic value, then this could be very interesting. FWIW Barron's had an article on IEP in the past couple of weeks pegging the sum of parts around $64 per share. Link to comment Share on other sites More sharing options...
giofranchi Posted June 14, 2013 Author Share Posted June 14, 2013 http://www.gurufocus.com/news/221438/carl-icahns-newest-beneficiary giofranchi Link to comment Share on other sites More sharing options...
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