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- By Graham Griffin
Icahn is known for taking activist positions in undervalued, struggling companies and working with management in order to improve profitability as well as unlock value for shareholders. He seeks to avoid consensus thinking and believes the momentum with trends will always fall apart.
Icahn first acquired his Tenneco holding in 2018 with the purchase of 5.65 million shares. The holding flew under the radar and remained unchanged until the second quarter of 2020, when Icahn boosted it by 61.67% with the purchase of 3.48 million shares. Since that initial addition to the holding, Icahn has been in a continual buy and sell pattern as the stock price fluctuates.
On March 9, the guru sold off an additional 1.63 million shares to cut the holding by 27.88%. Icahn has cut the holding by 59.44% in March alone, negating the 40.05% addition he made on Feb. 16. On the day of his most recent reduction, the shares traded at an average price of $11.62 per share. Overall, the sale had a -0.09% impact on Icahn's portfolio, and GuruFocus estimates the total loss of the holding throughout its history at 38.25%
Tenneco's emissions-control products meet strict air-quality legislation, optimize engine performance, improve fuel economy and acoustically tune engine sound to fit a vehicle's profile. Ride-control products enhance safety by enabling improved steering, braking and acceleration as well as improving ride comfort. Champion, Fel-Pro, Moog, Monroe and Walker are some of Tenneco's well-known aftermarket brands.
On March 12, the stock was trading at $12.87 per share with a market cap of $1.05 billion. Share prices have been making a slow recovery after falling off at the beginning 2020 and the GF Value Line shows the stock trading at a modestly overvalued rating.
GuruFocus gives the company a financial strength rating of 3 out of 10, a profitability rank of 6 out of 10 and a valuation rank of 10 out of 10. There are currently eight severe warning signs issued, including extremely low interest coverage and assets growing faster than revenue. The company's cash-to-debt ratio of 0.15 ranks the company lower than 81.79% and the weighted average cost of capital exceeds the return on invested capital.
Icahn is the second largest shareholder with 5.19% of shares outstanding. Other top shareholders include Vanguard Group Inc. (Trades, Portfolio), BlackRock Inc. (Trades, Portfolio) and Fuller & Thaler Asset Management, Inc. (Trades, Portfolio).
At the end of the fourth quarter of 2020, Icahn's portfolio contained 18 stocks, with two new holdings. It was valued at $20.06 billion and has seen a turnover rate of 3%. The top holdings are Icahn Enterprises LP (NASDAQ:IEP), Occidental Petroleum Corp. (NYSE:OXY), CVR Energy Inc. (NYSE:CVI), Herbalife Nutrition Ltd. (NYSE:HLF) and Cheniere Energy Inc. (LNG).
By weight, the top three sectors represented are industrials (61.96%), energy (18.69%) and consumer defensive (9.54%).
Disclosure: Author owns no stocks mentioned.
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This article first appeared on GuruFocus.