“The Mt. Kisco Society — Secret Society #2”

By Travis Johnson, Stock Gumshoe, October 4, 2007

So here we go again — I’ve already had a few readers trying to beat me to the punch and figure out the other four “secret societies” teased by the Porter Stansberry Investment Advisory, and this particular one, secret society #2, was suggested by a couple readers. Of course, they didn’t all agree on what the stock is, but we’ve got it figured out now.

This one is called “The Mt. Kisco Society,” and this is what we’re told by way of some clues:

The company is run by one of the 25 richest men in America.

“Mt. Kisco” is where he works.

They own casinos in Vegas and Atlantic City, and the Vegas one is the tallest building west of the Mississippi. (So clearly, anyone who has been to Las Vegas in the last ten years knows that one)

They also own real estate in Florida, Mass., and NY, a Martha’s Vineyard hotel, and a home furnishings business.

And the tempting part of our teaser: “over the past 4 years, the ‘Society’s’ investors have made more than 18-times the stock market as a whole … It simply doesn’t get better than this in the investment world.”

So what’s the Mount Kisco society?

Thanks to some ideas sent in by readers, and an extra tumbler of scotch thrown into the Thinkitationizer, the Gumshoe is pleased to inform you that this holding company is …

Icahn Enterprise Partners (IEP)

Yep, that Icahn — Carl Icahn. Probably most investors have heard of this guy, if only because he is an expert at using the press to amplify his relatively small positions in big companies to pressure management to return cash to shareholders … just ask the folks at Time Warner or Motorola, they’ll probably make a face when you mention his name.

But we certainly can’t deny that he’s been successful, whether you think he’s a greenmailer or a savvy shareholder-friendly investor. He is one of the 25 richest folks, thanks to roughly $13 billion. Can you believe $13 billion only makes the top 25? This is one crazy world.

Icahn Enterprises Partners is a new name for what used to be Icahn’s real estate holding company, American Real Estate Partners — and yes, it is a partnership, just like the newly listed Blackstone or any of a number of other MLPs or LPs, which means that, depending on your situation, there may be some additional tax complication to take into account (and a few forms, like K-1s, that might not be familiar to you).

So, just to sort out the details:

The big tower in Vegas is, of course, the Stratosphere hotel and casino. Can’t say it’s one of my Vegas favorites, but it takes all kinds (and hey, they’re running a 007 special right now — 2 for 1 martinis! Can you imagine James Bond using a martini coupon?).

The Mt. Kisco digs are Icahn’s offices in that bucolic Westchester village, where I think he still owns an office park.

IEP is a bit smaller than Leucadia but certainly still sizable, a bit over $7 billion, and it has had a remarkable growth in book value of something like tenfold over the last fifteen years or so. It is still primarily real estate-related, but since Icahn essentially rolled his hedge fund management company into the partnership it is more diversified now than it was before it changed names and reorganized, which officially went through about two weeks ago.

And just as with Blackstone, you would only buy this one if you really wanted Carl Icahn to decide everything that happens to your money — he owns something like 90% of the shares and I would imagine that he is as happy to hear your opinion about IEP management as Dick Parsons was to hear how Icahn felt about Time Warner’s decisionmaking. I’m not sure how the dividends work on this one — it has a very low dividend (much lower than Blackstone’s mininum 5% or so), but must somehow spin off earnings to shareholders due to the LP status — there may be special dividends that I’m unaware of, which would certainly be worth investigating if you want to join Carl on his wild ride. My guess is that, because of the significant reorganization when Icahn essentially sold his management firm to his real estate partnership, figuring out what’s really going on with the company might take a little longer than usual.

full disclosure: I own both partnership units and options in Blackstone, but not any other company mentioned here.

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