Guru Carl Icahn (Trades, Portfolio) is an American business magnate, investor, activist shareholder and philanthropist. He is the founder and majority shareholder of Icahn Enterprises, a diversified conglomerate holding company based in New York City. Icahn is currently ranked as the 43rd richest person in the world according to Forbes.com with an estimated net worth of $17.7 billion.
In the first quarter of 2016, Icahn added 39,347,282 shares of Pep Boys - Manny Moe & Jack (PBY, Financial).
Pep Boys was originally founded in 1921 when four friends had the idea to enter the auto supplies industry because they viewed it as an emerging market. Emanuel “Manny” Rosenfeld, two Moes - Maurice “Moe” Strauss and Moe Radavitz and W. Graham “Jack” Jackson all chipped in $200 dollars each and for a total of $800 to open their first Pep Boys store in Philadelphia. Since the initial $800 startup cost, Pep Boys has expanded and now has 806 locations across the U.S. and Puerto Rico.
Pep Boys has a market cap of $1 billion, an enterprise value of $1.12 billion, a P/B ratio of 1.83 and a quick ratio of 0.27.
According to GuruFocus, the company has a financial strength rating of 6/10 with a cash to debt ratio of 0.37, ranking them lower than 64% of the 1,241 companies in the Global Auto Parts industry. Gurufocus ranks Pep Boys with a profitability and growth rating of 5/10. The company has one severe warning sign according to GuruFocus, which is the gross margin has been in long term decline.
Icahn is well-known for his relentless ability to take risk. At one point, Icahn was the biggest shareholder of Blockbuster Video before the company went bankrupt. Blockbuster went bankrupt because its industry changed and Netflix (NFLX, Financial) had a superior business model. Pep Boys is also in an industry that is changing. The company is going to have to compete with Tesla (TSLA, Financial) in the near future. Tesla just announced that it will be releasing the Model 3 next year and already over 115,000 people have reserved the car that will be serviced by Tesla itself. This could potentially affect Pep Boys' business in the future if Elon Musk's master plan for Tesla successfully comes to fruition.
Cheers to your investment success.
(Disclaimer, author does not currently own any shares of this holding)
