Author: Derek Hoffman

Last Friday after the Goldman Sachs (GS) fraud charges, the DOW Industrial Average (DJIA) and S&P 500 (SPX) closed with their biggest dump since February of this year. The DOW recorded a 1.13% loss while the S&P 500 dropped 1.61% on the day. The S&P 500 closed at 1,192.33 — still over 49 points higher than its 50-day moving price average:

Our friends at Bespoke Investment Group diligently determined 73% of the trading days in the last 2 months have been up days. Since 1980, there have been only 3 other times such an event has played out similarly. However, according to Joe Weisenthal at Business Insider, in the 71 trading days year-to-date, the S&P 500 has not booked a single up 2% day and only 2 sessions were up 1.5% days.

If we look back to the last recovery from the Enron/Worldcom downturn, confidence in the system yielded a gradual ‘floating-type’ climb higher for equity markets. As criminals of the downturn were put behind bars and plastered on front pages, i.e. Jeffrey Skilling and Dennis Kozlowski, confidence gradually restored among investors.

In this cycle, last week an ex-trader at Bank of America (BAC) and Morgan Stanly (MS) pleaded guilty to a fraudulent trading scheme. As the penalties and punishments continue for the bad guys, retail investor confidence should improve. Thus, we may not see a big correction that some pundits are seeking, rather more of a lighter one as retail investors feel the waters are safe again.

On an outside note, we may start seeing more of Nouriel Roubini and Meredith Whitney with their infamous doom-and-gloom reports. From a technical perspective, it seems like the most opportune time for their redemption after ‘hiding’ during the massive bear market rally that has proved them wrong over and over again.

To determine whether the Goldman news will lead to a larger correction, keep an eye on these important market moving stocks slated to report earnings this week: Citigroup (C), Eli Lilly (LLY), Coach (COH), Goldman Sachs (GS), Johnson & Johnson (JNJ), Yahoo (YHOO), Abbott (ABT), Altria (MO), AT&T (T), Amgen (AMGN), eBAY (EBAY), Lockheed Martin (LMT), Morgan Stanley (MS), Starbucks (SBUX), Wells Fargo (WFC), American Express (AXP), Microsoft (MSFT), Pepsico (PEP), Amazon (AMZN), and Honeywell (HON).

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On February 22nd, Genzyme (GENZ) said Carl Icahn will nominate 4 directors, including himself, to Genzyme’s board of directors. The election is slated to take place at the annual meeting on May 20th.

The Genzyme news is an opportune time to take notice of some of Icahn’s recent botched investments. We uncovered a lot of shareholders dumped in the mud while trying to piggy-back Icahn’s investments. Here are six Icahn flops that I could find for you after a round of stock sifting:

1) WCI Communities (former ticker: WCI)

On January 16, 2007, a Securities and Exchange Commission filing disclosed that Icahn was the beneficial owner of 14.57%, or 6.1 million shares, of WCI Communities Inc. In the filing, Icahn indicated he intended to contact WCI to discuss how to “unlock the inherent value” of its shares. Icahn served as chairman for the homebuilder. Icahn paid an average $18.46 a share — about $112.6 million — for his stake in WCI. Icahn’s shares of WCI stock are worthless today since WCI filed for bankruptcy and no longer trades on the NYSE under the ticker WCI.

2) Motorola (MOT)

On January 30, 2007, Motorola (NYSE: MOT) received notice that Icahn owned about 33.5 million shares — at the time representing a 1.39% interest in the company. Again, Icahn pushed for a seat on the board. The stock price was around $19 per share. But he was turned down by the majority of the stock holders in an election for Board of Directors. On March 24, 2008, Icahn sued Motorola as part of his efforts to gain 4 seats on Motorola’s Board and force a sale of its mobile business. Today, shares of MOT are fetching $7 per share.

3) Blockbuster Inc (BBI): “Wow! What a difference (Icahn makes)!

In 2005, Carl Icahn began his investment stake in Blockbuster (BBI) and securing representation on the company’s board. Icahn spent roughly $320 million on his stake at a time when BBI was over $10 per share. Icahn has been snowboarding downhill with BBI’s shares ever since he became an “activist” investor in the company. Today, Blockbuster shares are trading at $.41 per share. I guess his activism has been to destroy value.

4) Time Warner (TWX)

In 2006, Carl Icahn controlled 3% of the Time Warner (TWX) and waged a quixotic campaign to split the company into 4 separate units.
But he didn’t get anywhere close. Instead, he only convinced management to increase share repurchases — even that was a horrible move. Shares were trading at about 45 when that was announced. Today, TWX shares trade at $30.50 per share.

4) Telik (TELK)

In early 2007, Carl Icahn owned over 5 million shares in biotech company, Telik (TELK). He purchased shares between $7 and $17 per share. By early 2009, Icahn sold his stake in Telik for under $1 per share.

5) Greenbrier Companies (GBX)

In early 2008, Carl Icahn acquired an approximate 10% stake in railroad freight car company Greenbrier Companies (GBX). At the time of Icahn’s share acquisition, shares of GBX were over $20. Icahn had the vision to hopefully merge GBX with another one of his heavily owned companies, American Railcar (ARII). However, his vision remained nothing but a vision. His vision flopped, and today Greenbrier is trading at appoximately $10 per share.

6) Guaranty Financial (former ticker: GFG)

In January 2008, Carl Icahn owned roughly 10% of the Texas-based financing group. The stock was trading over $12 per share. Icahn pressured its former parent, Temple-Inland (TIN), to spin off the financial group. The bullied action resulted in Guaranty finally declaring bankruptcy in the summer of 2009.

Relative Success

Two deals exhibiting Icahn’s corporate raider success include Eli Lilly’s (LLY) acquisition of ImClone and Anadarko’s (APC) acquisition of Kerr-McGee.

As you can see and conclude, the road bumps in Icahn’s track record are not so friendly to the Billionaire’s fellow shareholders. Would you rather invest with Warren Buffett or Carl Icahn? I would opt for the more shareholder friendly of the two and steer clear of Genzyme (GENZ) right now. Another disaster might be brewing with Icahn.

Disclosure: No positions in the companies mentioned.

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See Also:

• How Carl Icahn Screwed Minority Shareholders
• Icahn Humbles A Yale Student Who Asks Him The Same Question Twice
• Carl Icahn Goes Silent As Lawsuits Pile Up