Carl Icahn, the famed billionaire activist investor, took to Twitter (TWTR) on Wednesday morning, and what he said sent ripples through the stock market today. Not only did Icahn sell off his Netflix (NFLX) stake — he thinks Apple (AAPL) stock represents another Netflix-esque opportunity.
Is he hinting at something? In other words, did Icahn essentially just tell the world that he not only sold NFLX but that he bought AAPL?
I’d be willing to wager that that’s precisely what Icahn is telling us. Here’s why.
Icahn Is Head-Over-Heels for AAPL Stock
Just so nothing is lost in translation, let’s take a look at Icahn’s Wednesday morning tweet that had the market abuzz:
Sold last of our $NFLX today. Believe $AAPL currently represents same opportunity we stated NFLX offered several years ago.
— Carl Icahn (@Carl_C_Icahn) June 24, 2015
In August of 2012, Icahn bought into NFLX stock at an average price of $58 per share. He took a massive position, acquiring nearly 10% of the company. And then, 14 months later, he cut his stake by more than half and booked a 457% gain.
At the time of his last quarterly filing, Icahn still had a 2.3% stake in Netflix. Assuming he sold NFLX at $700 per share today, he pocketed gains of more than 1100% on the last of his stake. So, to say that AAPL stock represents a similar opportunity today is quite an endorsement.
There are two reasons I think Icahn is not-so subtly telling us that he used the NFLX proceeds to buy more AAPL stock today.
First, any investor with half a brain who actually believes they see a stock that’s severely undervalued will buy that stock. It’s just that simple. Look at the massive gains NFLX stock booked over the last few years (it has doubled in 2015 alone, for cryin’ out loud) — you’d have to actually be insane to pass up on an opportunity like that again.
Icahn had 1.4 million shares of NFLX at the end of last quarter. Let’s assume — conservatively, in my opinion, since Netflix has traded higher than this for most of the time since then — that he sold out of NFLX at an average price of $550 per share. That means Icahn’s proceeds from the sale would be some $770 million.
Sure, Icahn already owned $6.6 billion in AAPL stock at last check, so an additional purchase of $770 million in AAPL stock would be only a modest boost to his holdings. But if you’re that bullish, no amount is too small.
The second reason I think Icahn actually pulled the trigger on buying AAPL is because he’s been a devout AAPL bull for years now, and it has paid off for him thus far. CNBC recently dubbed Icahn’s AAPL trade “one of the greatest trades of all time,” and calculated that the billionaire has made about $3.4 billion on his position.
Not afraid to toot his own horn and announce his new positions, Icahn knows that when he publicly shares a stock he recently bought, it often goes up immediately.
Icahn recently wrote an open letter to Apple CEO Tim Cook encouraging him to do more share buybacks and pegging the true value of AAPL stock at $240 per share, nearly double its value today.
And when you consider the brilliance of his Netflix trade … he could be right.
As of this writing, John Divine was long shares of AAPL stock. You can follow him on Twitter at @divinebizkid or email him at editor@investorplace.com.
