by Will Ashworth | February 15, 2013 8:35 am
Thursday’s headline that Warren Buffett is buying Heinz (NYSE:HNZ) in partnership with 3G Capital once more has me thinking about holding companies. They’ve been in the news a fair bit lately given Carl Icahn’s investments in Netflix (NASDAQ:NFLX) and Transocean (NYSE:RIG). The media are always trying to find the next Berkshire Hathaway (NYSE:BRK.B), and I’m no different. I just love studying the disparate investments of holdings companies, hundreds of which are around the world. Let’s look at some standouts.
Icahn Enterprises (NYSE:IEP)
Carl Icahn might be 76, but he’s certainly not slowing down. He’s made plenty of his own news lately, most notably for his $700 million unrealized profit from Netflix. However, the company that’s 93%-owned by Icahn himself is much more than equity investments. IEP has control positions in companies operating in eight different industries, including automotive and gaming.
Although Icahn is often painted as an activist investor, many of his holdings are long-term investments, which is what makes him different from Bill Ackman. Over the past 15 years, IEP has achieved an annualized total return of 14.6% — three times better than the S&P 500.
This is one of my favorite U.S.-based holding companies. Its history dates back to the mid-1940s, when Bob and Larry Tisch purchased a winter resort in Lakewood, N.J. Over the years, the family has bought and sold many businesses, always with a value bent. Today, it has control positions in three publicly traded companies: CNA Financial (NYSE:CNA), Diamond Offshore Drilling (NYSE:DO) and Boardwalk Pipeline Partners (NYSE:BWP), as well as 100% ownership of HighMount Exploration and Production and Loews Hotels. In addition, it held $3.9 billion in cash and investments at the end of 2012.
It’s going through a rough patch at the moment due to CNA Financial’s hit from Hurricane Sandy. Not to worry. Since 2006, it has increased book value per share by 64.6% to $49.67, which is better than Berkshire Hathaway.
Grupo Carso (PINK:GPOVY)
Here’s your chance to invest with the richest man in the world — Mexico’s Carlos Slim. The billionaire’s big break came in 1990, when the Mexican government sold Grupo Carso and its two telecom partners a 20% economic interest and, more important, 51% voting control in Telmex (PINK:TMXLF), Mexico’s phone company. Grupo Carso owned half of that 20%.
From there, Slim’s wealth took on a life of its own until Grupo Carso was split into three separate companies: Carso Global Telecom, Grupo Carso and Invercorporación. Slim pretty much owns all of Mexico, including the Sears stores. Outside Mexico, he has some interesting investments, such as a 16% stake in Saks (NYSE:SKS) and a 7.3% interest in New York Times Co. (NYSE:NYT). He’s truly a man of the world.
Some might not consider this a holding company in the Berkshire Hathaway mold because it’s so focused on luxury. But in truth, CEO Bernard Arnault (the Arnault family has 62.7% of voting shares) continues to cobble together a group of businesses that each could stand on their own if need be.
It now operates five business groups: Wines and Spirits, Fashion and Leather Goods, Perfumes and Cosmetics, Watches and Jewelry, and Selective Retailing. LVMH is a who’s who of good taste.
In 2012, it generated $37 billion in revenue and $5.2 billion in net income, making it one huge company. Its biggest acquisitions in recent years include the 2011 purchase of Italian jeweler and watchmaker Bulgari for $5.2 billion and its 22.6% investment in Hermes International, which sits on the books valued at $7.1 billion as of the end of 2012. Getting people to live large is LVMHs raison d’etre.
Harbinger Group (NYSE:HRG)
The smallest of the five investment companies profiled here, Harbinger is run by hedge fund billionaire Phil Falcone. It was formerly an oil and gas company co-founded by George H.W. Bush and controlled by the Glazer family (Tampa Bay Buccaneers, Manchester United) until 2009, when Falcone acquired 51.6% of its shares.
He then went to work building a team of professionals who would acquire controlling equity interests in companies across a diversified range of industries that will generate significant cash flow in the long term. Harbinger’s first acquisition came in January 2011, when it acquired 54.4% of Spectrum Brands (NYSE:SPB), best known for Rayovac batteries, and then merged Spectrum with Russell Hobbs, a manufacturer of small kitchen appliances in June 2010.
Today, Harbinger Group consists of Sprectrum Brands along with two wholly owned insurance companies, a wholly owned asset-based lender and a 19% investment in North American Energy Partners (NYSE:NOA), a service provider in the Canadian oil sands. While Falcone has made plenty of bad investments in recent years, this little holding company is a winner.
As of this writing, Will Ashworth didn’t own any securities mentioned here.
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