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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. The guru has been in a continual buy and sell pattern, regularly adding 30% to 80% to the holding as the price per share drops.
On March 22, Icahn purchased an additional 3.25 million shares of Tenneco (NYSE:TEN) as the average price per share dropped to $11.25. This marks the second large addition the guru has made this month. The purchase boosted the holding by 45.69% and had a 0.18% impact on the equity portfolio overall. GuruFocus estimates Icahn's total loss on the holding at 31.93%.
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 25, the stock was trading at $10.28 per share with a market cap of $831.74 million. According to the GF Value Line, the shares are trading at a modestly undervalued 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 for the company, including new long-term debt, extremely low interest coverage and declining margins. The return on invested capital has been wiped out by the weighted average cost of capital over the last three years.
Icahn is the largest shareholder with 12.65% 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.