Topic: Transocean (SIX: RIGN)
Judging by the following two charts, demand surged around the turn of the year in Transocean shares. The explanation: Between January 1st and January 9th (Chart 1) Carl Icahn must have bought the lions share of the options and shares in Transocean at an average price around 42-46, I would guess, based on traded volume (Chart 2) and charts indicating where volatility spiked.
The first chance you would have had to act on the news that he’d invested was at 50! On January 14th, at the open, that information was in the public domain. 50 was the opening price. Today we’re at around 53 and I saw an article asking if you should follow Icahn into this stock because of the “Carl Icahn Acquires 5.61% of Transocean’s Shares” news hitting the wires today.
The fact is: He held over 3% of Transocean as of Janury 13th. Whatever he bought since is a lot less than he already held. I’m sure he’s someone who is very well aware of when the public is informed and I’m sure he also knows very well, why he published the demand for a USD 4 dividend today only, and not before. If his average price was 44 for the first tranche (say 4%, before the purchases announced today) and the remaining 1.6% were bought at 52, he’s average entry price would be CHF 46,30. So he’s up 13% at the very least.
Now knowing that he averages somewhere between 20-35% a year for his fund (2011: 35% – 2012: +20%) and knowing that he’s sitting on a profit of at least 13% already, – but likely closer to 20%! – , it’s a tough call: He’s already generated significant alpha for himself and the market is looking streched, overbought according to several veterans, i.e. the technical measures they follow. But he has firepower left and the markets trend is up and Transocean had been oversold (looking at the long term chart 3). 52-54 was the major resistance in the last 24 months! A quick move to 60 isn’t that far fetched for the coming months. More likely than a retreat to 40-44, in my opinion.
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