Owning Icahn Enterprises Partnership Units Is A Very Complex Investment

Mat Szwajkos/Getty Images Entertainment Because many investors do not correctly understand the Icahn Enterprises L.P. (NASDAQ: IEP ) historical price performance and the $2.00 quarterly partnership distributions, they avoid buying the partnership units. With some clarifications, bullish stock market investors may want to consider adding IEP to their portfolio after consulting a tax expert. With latest trading of Occidental Petroleum ( OXY ) by Carl Icahn and Warren Buffett, the market is again comparing the two. IEP Stock Performance

A major mistake that many make with Icahn Enterprises is just looking at IEP unit price performance alone. This is a major mistake. The partnership pays a quarterly $2.00 distribution that a holder can elect to take in cash or additional partnership units. The better way to look at IEP performance instead of just using IEP unit price changes over a long period of time, is for an investor who elected to take units to multiply their current total number of units they own by the current price and compare that figure with their original cost basis. You should compare the total current value of the IEP holding to total purchase cost. This is something like factoring in stock splits where you just don’t look at stock price changes alone over time.

The large quarterly distribution of new units has greatly increased the number of units outstanding. For example, the number of units outstanding on February 26, 2015 was 132.1 million and on December 31, 2021 they were 293.4 million. The impact of this large dilution from issuing additional units via $2.00 quarterly distributions really only impacts investors who elect to take the distribution payments in cash instead of new units. All holders, however, are impacted by the selling of new IEP units by the partnership to raise cash. In 2021, they sold 15.17 million new units that raised $833 million cash at an average price of $54.91 per unit. The total capitalization over time has been partially impacted by the selling new units to raise cash besides just the increase in the number of units via the quarterly distributions.

IEP Stock Price and IEP Total Equity Capitalization Data by YCharts Occidental Petroleum-Icahn vs. Buffett

Many people like to compare Carl Icahn and Warren Buffett. When you invest in either IEP or Berkshire Hathaway ( BRK.A ) you are really investing in personalities of these two men. Decades ago I had previous dealings with both. Icahn, in my opinion, is “what you see is what you get”. Buffett, however, is just the opposite. His image of a boy scout is just all PR. I have a very strong negative opinion of him as a person and as a businessman/investor. For at least the last few decades Buffett’s investment performance is much better than Icahn’s, but both have done very well over a very long period of time. (Buffett might now be much richer than Icahn because Icahn enjoys spending money-he has many beautiful very large residences and has for decades made large donations to various charities and institutions.)

I assume that Buffett waited until Icahn sold his OXY shares before he started to make new large purchases. Both men butted heads in the past over OXY. I am uncertain about the future of OXY, but the stock has greatly underperformed the rest of the market for the last 40 years.

(The recent OXY sales by Icahn are being included because some readers might be interested in the selling prices and dates.)

Icahn’s Occidental Petroleum Sales Name of Reporting Person Date of Transaction Amount of Securities Price Per Share ($) Icahn Partners LP 02/28/2022 (357,487) $41.84 Icahn Partners LP 03/01/2022 (8,057,301) $46.52 Icahn Partners LP 03/02/2022 (7,347,578) $48.34 Icahn Partners Master Fund LP 02/28/2022 (242,513) $41.86 Icahn Partners Master Fund LP 03/01/2022 (5,736,756) $46.52 Icahn Partners Master Fund LP 03/02/2022 (5,199,832) $48.34 Source: SEC 13D/A Mar 2 Filing Icahn Enterprises Business Model

I divide Icahn Enterprises into three different areas. The first are a group of operating businesses. The second are investments that they do not completely control. The third, is their trading area, which includes a significant amount of hedging/short selling.

4Q 2021 and Annual 2021 Income Statement 4Q 2021 and Annual Income Statement (sec.gov) Group One-Operating Businesses

Icahn Enterprises’ operating group would normally be considered a conglomerate because most of the businesses are in different industries. Decades ago, this diversity was often considered a positive, but I assert that diverse industries often will result in sub-par results and that concentration in […]

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