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Tune In to Icahn’s September Buys

Investor adds to stakes in Motorola, Take-Two, Hain


The market may change but some things stay the same: Where Carl Icahn goes, money flows. Sometimes right out of his coffers, but more often than not, Icahn knows a good earner when he sees it.

The iconic investor sees something in Motorola (NYSE: MOT), most likely the $8.3 billion in cash the company is sitting on thanks to its healthy scanner, safety radio and telecom device business. During  September, Icahn invested another $100 million in Motorola. This comes after months of Icahn growing his stake in the company — he acquired nearly 50 million in shares between January and August. The investment in the mobile phone manufacturer, who has managed to finally turn around its mobile phone business thanks to the major success it’s had with the Google (NASDAQ: GOOG) Android-powered Droid smart phone line, comes in anticipation of the company’s split into two operations. Motorola has been planning to split into two companies, with Motorola Mobility controlling its mobile phone business and Motorola Solutions  acting as sole controller of its radio and telecom device businesses. The $8.3 billion in cash assets was going to split as well, with $4 billion going toward financing further development of Mobile Mobility and the remainder going toward paying off Motorola’s significant debt. While using the cash to these ends would serve investors over the long term, it appears that Icahn is increasing his control over the company to see the money dispersed prior to the company’s split into separate entities.  That’s good for shareholders looking for a quick payoff from an investment that hasn’t been paying dividends, but potentially dangerous for the future of Motorola Mobility.

Icahn has also shuffled his money around in the entertainment industry. Earlier this year, he attempted a hostile takeover of film studio Lions Gate Entertainment (NYSE: LGF), offering $6 a share for the 70% of shares in the company he didn’t already own. Lions Gate, in turn, released 16.2 million new common shares to company director Mark Rachesky, giving him a 28.9% stake in the company to Icahn’s 37.5% diluted stake. Icahn upped his offer to $7.50 at the end of August and seems intent on gaining control of the company prior to its annual shareholder meeting scheduled for Oct. 12. Now he has his sights set on the video game industry, buying up $1 million in shares of Take-Two Interactive Software (NASDAQ: TTWO) between Sept. 10 and 20 at prices between $9.45 and $9.76. Take-Two had great success with its spring release of video game western Red Dead Redemption, which led it to improved year-on-year third-quarter earnings with $354 million in sales and net income of $6 million. Icahn’s bullish stance on Take-Two indicates strong earning potential going into the final quarter of fiscal 2010, but investors shouldn’t rush to buy up shares. Take-Two’s Mafia II released to tepid sales at the end of the summer after a prolonged and expensive development. Next week’s NBA 2K11 is also reportedly plagued by software bugs that could hamper its sales potential.

Icahn has also made significant investments in the food and telecom service industries in September. He purchased $27 million worth of shares in the Hain Celestial Group (NASDAQ: HAIN), the organic foods and home care products company whose business has shown a remarkable recovery over the past eighteen months since the market crash in 2008.  In September, Icahn  he also poured $10.5 million more into XO Holdings (OTC: XOHO) and boosted his stake from about 53% to 62% of the company as XO was starting a number of broadband expansion projects. The time has passed to earn the most from  Hain Celestial, but investors would do well to consider purchasing shares in XOHO while the price remains low at 60 cents per share.

As of this writing, Anthony Agnello did not own a position in any of the stocks named here.

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