Marshall Hargrave: Billionaire Carl Icahn is the latest to grow wary of the market. During a Reuters last week, Icahn said “in my mind, it is time to be cautious about the U.S. stock markets.”
But he’s not the first, famed investors Jim Rogers and Doug Kass have been calling the market overvalued since May. However, the market has trekked higher — with the S&P 500 up 7% over the last three months.
Icahn does note that he’s having a great year, but he’s being very selective about the companies he purchases.
In an effort to keep investors from missing out on what appears to be a stubborn rally — where despite the media’s yearning for a pullback, stock’s continue higher — let’s see what Icahn is buying.
Here are the 3 Carl Icahn holdings the billionaire is buying in an overvalued market:
No. 1 Stock That Icahn Is Buying: Apple (NASDAQ: AAPL)
Icahn increased his stake in Apple by 59% during the first quarter, making it one of his largest holdings. Icahn got involved with Apple last year, pushing the tech giant to put its cash hoard to work for investors — namely in the form of buybacks.
Icahn prodded for six months before backing down in February. But he did note that he was somewhat victorious at Apple, pointing to Apple’s steady increase in its buyback program.
Back in April, Apple announced a 7-for-1 stock split, which made the stock more accessible to retail investors. It also increased its plan to return capital to shareholders to $130 billion by 2015, versus the previous $100 billion. This all came as the tech giant posted earnings for the quarter of $11.62 a share, beating expectations of $10.18 a share.
As of last quarter, Apple boosted its dividend payment by 8 percent. It now offers a near 2% dividend yield and its P/E ratio is under 16. Apple also has one of the best returns on investment in the industry, standing at 25% for the trailing twelve months.
Driving the company forward should be the product refresh, which will include an iPhone 6 and other products that will be released later this year. As well, it is working on integrating its Beats acquisition, which should make the company a larger player in the streaming music business. Then there’s the rumored smartwatch – iWatch – which could also be released this fall.