[Profit] +17% Gain On The Icahn-Hindenburg Trade

I made a trade 3 weeks back when Hindenburg Research published a paper accusing the legendary activist investor, Carl Icahn, of running a Ponzi scheme with his listed investment vehicle; Icahn Enterprise L.P.  (IEP).

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Background Story

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On 2nd May 2023, Hindenburg Research published a paper online accusing the investor Carl Icahn, of running a Ponzi scheme and overvaluing its underlying investments to prop up the share price.

IEP stock crashed from $50 to $32 (-36%) within 2 days of the paper's release.

 

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Recommended Read: Trevor Noah Explaining CPF

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Analysis

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I took notice of the massive dip and immediately thought if a short-term trade could happen in this scenario.

I went to look up the previous 2 companies that Hindenburg had released a short report on - Adani Enterprise and Block Inc; and noticed a trend.

Adani Enterprise -53% within 5 trading days of the short report released on 25 Jan 2023.

 

Block Inc -26% within 3 trading days of the short report released on 23 Mar 2023.

However, both stocks experienced a short-lived bounce back up within 5 days of their corresponding short-research release date.

Based on this, I was convinced that IEP would exhibit a similar trend pattern, bearing a closer resemblance to Block than Adani.

 

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Recommended Read: Why You Should Max Your CPF Retirement Sum Early

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Trade & Results

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03 May 2023: I entered a position on IEP at $32/share. 

It had fallen more than Block over a shorter period of time. 

Given that Icahn was famed for being aggressive, it felt like it was about time he would make an announcement strong enough for the stock to bounce.

04 May 2023: IEP fell to $30/share. Held on because the upside is coming!

05 May 2023: Stock bounced to $38, but I sold all my positions at $37.50 because the upward momentum was losing steam towards the back half of the trading day.

Return: +17% over 3 days, not too shabby I would say.

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Recommended Read: Simplifying UOB's 7.8% Interest Rate

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Conclusion

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I don't know how strong this trading strategy is, but so far it seems to be working fine on 3 examples.

I now look forward to the next Hindenburg short report, which I guess will be in July 2023, because they seem to be releasing one every two months.

If you like articles like this, you might like our other previous trade on Netflix, link below.

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Recommended Read: My 30% Gain from Netflix

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My 30% Gain from Netflix

This week I have sold my position of 15 Netflix shares that I bought last week.

Over this 1 week period, I have made a 30% return on capital.

This bet of mine was made because of a historical price trend on Netflix's share price.

I bought my shares last week at $324 and sold them this week at $422.

The shares could go higher but I felt that it was good enough to make 30% in a week so I sold it.

But the main idea is the strategy used because of this investment bet.

Below is the 1-year price trend for Netflix


What is interesting is the past 5 years' historical price movement from January to February.

2014 Jan-Feb


 2013 Jan-Feb


2012 Jan-Feb


2011 Jan-Feb



2010 Jan-Feb


We can see from the 5-year historical (2014, 2013, 2012, 2011,2010) performance that for the period of January to February, Netflix faces a 100% probability of having a minimum 10% increase in share price.

This year adds to it as the 6th consecutive year this trend is accurate - it is actually more than 6, but showing data going beyond 5 years in this article is not my main point.

While there is a tendency for the price to continue rising until mid-Feb or March, I sold my position because it was added on leverage for this one-time gain.

The price trend is only 1 of the 2 reasons I invested in Netflix.

The other is that its price had hit a 1 year low, showing support at around $310-$320 area (look at the first chart).

It is based on these 2 reasons, I invested in Netflix last week for a short 1-time gain.

I believe there are many more companies with such potential/trends.

One of them I believe is Amazon.com - the E-Commerce Gaint.

I will be posting about Amazon.com's trend next week if this strategy is one that works or one that I was just lucky.

Stay Tune~!

PS: The strategy for this investment was derived from the book below.
Although the full strategy is not from this book but based on my understanding of the original strategies, the fundamental idea is similar.
We buy on low prices or undervalued fundamentals compared to the past, such as near-bottomed prices and historical trends.

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