Net asset value (NAV) is usually used in mutual funds and unit trust funds to help determine the fund’s value, which is generally calculated by the value of assets minus the value of liabilities. This metric is also referred as net book value, or book value. To derive the per-share value of Icahn Enterprises (IEP), we divide the NAV with total outstanding units in order to get the net asset value per share.
Icahn’s major investment
At the end of 2Q16, IEP’s market value of subsidiaries was $4.4 billion ($5.6 billion at the end of 1Q16). The value of unlisted companies was at $4.6 billion ($4.7 billion at the end of 1Q16). The decrease in the value of market-listed subsidiaries was largely due to CVR Energy’s value. The increase in the value of unlisted companies is due to the increase in equity attribution from IEH Auto, PepBoys, and Trump Entertainment. The ratio of the value of listed to unlisted companies stands at 0.95x (1.2x in 1Q16).
Icahn Enterprises’ major investments are in CVR Energy (CVI) and Federal-Mogul (FDML ), an auto-parts company. Like all other refining stocks CVI’s share price too sharply corrected. CVI stock price is now $14, which has declined by 65% from $40 on a yearly basis from August 5, 2015, to August 5, 2016. Icahn has proposed to buy a 100% stake in Federal-Mogul.
Is Icahn trading at a discount to its NAV?
On August 5, 2016, IEP closed at $56.0 per share. The company’s asset value at the end of 2Q16 was ~$4.0 billion ($5 billion in 1Q16). There were 135 million units outstanding in 2Q16 (132 million units in 1Q16).
Thus, the net asset value per share at the end of 2Q16 stands at $29.6 per unit ($38.3 per unit in 1Q16). IEP’s units have generally traded at a premium to its NAV. Investors pay a premium, as they can invest along with Mr. Carl Icahn. But in the past few quarters, IEP has been trading at a discount to its NAV.
Like IEP, Berkshire Hathaway (BRK-B), Leucadia (LUK), and Loews (L) have wide ranges of holdings. However, IEP can’t be strictly compared to any other company due to its different portfolio holdings in diverse sectors. From August 5, 2015, to August 5, 2016, IEP declined by ~26.2%, as compared to the S&P 500 ETF Index’s (SPY) gain of 8.8%. During the same period, Leucadia declined by 18.8%. Loews and Berkshire-B gained by 7.9% and 3.0%, respectively.
Continue to the next and final part for a look at what analysts are saying about Icahn Enterprises.