Carl Icahn’s Love for Occidental Petroleum Might Be Costly

Last week, Carl Icahn’s hedge fund, Icahn Carl C, filed its 13F for the first quarter of 2020. According to the filing, the hedge fund’s largest buys were Occidental Petroleum (NYSE:OXY), Delek US Holdings (NYSE:DK), and Newell Brands (NYSE:NWL).

In the first quarter of 2020, Occidental Petroleum was the fifth-largest holding of Icahn Carl C. The hedge fund accumulated Occidental Petroleum in the second quarter of 2019. Since then, Occidental Petroleum was among the hedge fund’s top-ten holdings. Last year, when Occidental Petroleum acquired Anadarko Petroleum (NYSE:APC), Carl Icahn was against the deal. He went to court to challenge the company’s management. According to Icahn, Occidental acquired Anadarko at an inflated price. Chevron (NYSE:CVX) was also in the race to acquire Anadarko.

Occidental Petroleum’s performance

At the end of the first quarter of 2020, Occidental Petroleum accounted for 5.7% of Icahn Carl C’s total portfolio of publicly traded securities. A quarter ago, the figure was at 3.6%. On a year-to-date basis, Occidental Petroleum’s stock prices have fallen 65.1%. The Energy Select Sector SPDR ETF has fallen 37% during this period.

On Tuesday, Occidental Petroleum closed at $14.37. Analysts’ mean target price suggests a possible upside of 6.5%. Around 64% of the analysts tracking the stock recommended a “hold.” The remaining 28% either recommended a “sell” or a “strong sell” on the stock. Only 8% of the analysts surveyed by Reuters recommended a “buy” or a “strong-buy.”

Although oil prices have recovered from April’s decline, they’re still far away from the company’s breakeven level. Based on Occidental Petroleum’s investor presentationits breakeven is WTI crude oil at $40 per barrel. On Tuesday, WTI crude oil active futures closed at $32.5 per barrel.

Carl Icahn’s top holdings

At the end of the first quarter of 2020, Icahn Enterprises LP accounted for 52.9% of the hedge fund’s total portfolio of publicly traded securities. Notably, Icahn Enterprises LP was the largest holding. CVR Energy and HP were the hedge fund’s second and third-largest holdings.

In the last quarter, energy stocks accounted for 16.9% of Icahn Carl C’s total portfolio. We already discussed the sharp decline in the energy sector. Industrial stocks accounted for more than 50% of Icahn Carl C’s portfolio. In the aftermath of the COVID-19 outbreak, industrial stocks could continue to underperform the broader market, which might concern investors in Icahn Carl C.

For more hedge fund coverage, read Why Elliott Management Might Be in Trouble.