Carl Icahn Initiates Position in Delek US Holdings, Boosts Occidental Petroleum

Investing guru Carl Icahn has initiated a position in Delek US Holdings (DK), a 13F SEC filing confirms. The 84-year old snapped up 10.5 million DK shares, with a value of $166,000, during the 3-months ended 2020Q1. In March, Icahn revealed a 14.8% stake in Delek, leading the company to adopt a shareholder rights plan.

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“We have no choice but to take action to prevent a creeping change of control without a premium and on terms that would not deliver sufficient value for all shareholders,” Delek stated at the time.

As well as Delek, Icahn also boosted his position in Occidental Petroleum (OXY) by 66 million shares (or 293%), Welbilt (WBT) by 2 million, Newell Brands (NWL) by 2.5 million, the beleaguered car rental company Hertz Global Holdings (HTZ) by 11 million, and Cheniere Energy (LNG) by 0.5 million. At the time of the filing, his total portfolio of 19 stocks was worth $18 billion.

Occidental Petroleum is Icahn’s fifth biggest portfolio holding with a total of 88.6 million shares, making up 5.70% of the total portfolio. “While the stock remains somewhat of an option value given massive debt, we believe shares would react positively if all debt is pushed out beyond five years,” SunTrust analyst Neal Dingmann commented recently, as he upgraded the stock from Sell to Hold with a $13 price target.

Aside from OXY, Icahn’s number one stock remains Icahn Enterprises, with CVR Energy (CVI) in second place- and Icahn has already stated that Delek “could present an excellent synergistic acquisition opportunity” for CVI.

Delek recently announced that it closed the sale of the Bakersfield refinery for $40 million in cash. With the sale, DK expects to eliminate $14 million in annual operating expense and eliminate certain environmental obligations and asset retirement liability reserves on the balance sheet.

“We think this is positive for DK, as we expect most (like us) ascribed zero value to the Bakersfield asset. This represents “found money” of more than $0.50 per share, and while there might be some tax leakage, opex savings would increase that figure” cheered RBC Capital Brad Heffern on May 7.

Nonetheless he reiterated his Hold rating on the stock with a $16 price target, explaining that “DK does have some sum-of-the-parts upside, but we see the company potentially struggling to unlock this.” Shares in Delek have plummeted 47% on a year-to-date basis, and the stock shows a Hold analyst consensus.

In the last three months the stock has received 8 hold ratings vs just 1 buy and 3 sells. The $20 average analyst price target indicates 15% upside potential lies ahead. (See Delek stock analysis on TipRanks).