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Graham Griffin
Graham Griffin
Articles (170) 

Carl Icahn Further Cuts Tenneco Holding

Second small reduction in guru's auto parts manufacturer position

Carl Icahn (Trades, Portfolio) has revealed a reduction in his holding of Tenneco Inc. (NYSE:TEN) according to GuruFocus' Real-Time Picks, a Premium feature.

The guru 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.

On Dec. 3, Icahn made a small reduction in the holding for the second time in recent months. The guru sold 660,078 shares to slim the holding by 7.51%. During the day of the sale, the shares traded at an average price of $10.77 per share. Overall, the sale had an impact of -0.04% on the portfolio and GuruFocus estimates Icahn has lost 54.16% during the lifetime of the holding.

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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.

As of Dec. 8, the stock was trading at $10.40 per share with a market cap of $846.90 million. The GF Value Line shows the stock trading at a modestly undervalued level.

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GuruFocus gives the company a financial strength rating of 2 out of 10, a profitability rank of 7 out of 10 and a valuation rank of 10 out of 10. There are currently seven severe warning signs issued, including new long-term debt, assets growing faster than revenue and declining gross margin percentage. The weighted average cost of capital far exceeds the return on invested capital, which indicates the company will destroy value as it grows.

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Icahn is currently the top shareholder with 9.98% of shares outstanding. Other top shareholders include Vanguard Group Inc. (Trades, Portfolio), BlackRock Inc. (Trades, Portfolio), Fuller & Thaler Asset Management, Inc. (Trades, Portfolio), Citigroup Inc. (Trades, Portfolio) and Schwab Charles Investment Management Inc. (Trades, Portfolio).

Portfolio overview

At the end of the third quarter, Icahn's portfolio contained 16 stocks with no new holdings. It was valued at $17.37 billion and has seen a turnover rate of 3%. The top holdings are Icahn Enterprises LP (NASDAQ:IEP), Herbalife Nutrition Ltd. (NYSE:HLF), Cheniere Energy Inc. (LNG), Occidental Petroleum Corp. (NYSE:OXY) and CVR Energy Inc. (NYSE:CVI).

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By weight, the top three sectors represented are industrials (66.26%), energy (16.27%) and consumer defensive (9.83%).

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Disclosure: Author owns no stocks mentioned.

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