Carl Icahn's Tenneco Holding Starts to Regain Traction

Carl Icahn (Trades, Portfolio) has revealed yet another reduction in his holding of Tenneco Inc. (NYSE:TEN) according to GuruFocus' Real-Time Picks, a Premium feature. This marks the fifth reduction in the guru's holding in less than a month's time.

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.

On Dec. 17, Icahn made an additional 2.14% reduction in the holding, following his Dec. 14 reduction of 5.68%. Since his first reduction on Nov. 30, the guru has cut over 20% of the shares that he owned at the end of the second quarter. The most recent sale saw an additional 160,146 shares sold at an average price of $10.27 per share on the day of the transaction. Overall, the sale had a -0.01% impact on the portfolio.

• Warning! GuruFocus has detected 12 Warning Signs with TEN. Click here to check it out.
• TEN 30-Year Financial Data
• The intrinsic value of TEN
• Peter Lynch Chart of TEN

At the time of the first reduction, GuruFocus estimated Icahn had lost 52.65% on the holding during its lifetime. By Dec. 8, that number had jumped to a 54.16% loss. The company seems to be regaining some of its traction, as losses have dropped back down to 54.05% as of Dec. 23.

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. 23, the stock was trading at $10.44 per share, up 6.21%, with a market cap of $837.53 million. According to the GF Value line, the company is trading at a modestly undervalued rating.

GuruFocus gives the company a financial strength rating of 3 out of 10, a profitability rank of 7 out of 10 and a valuation rank of 10 out of 10 in accordance with the GF Value line. There are currently seven severe warning signs issued including new long-term debt, a declining operating margin percentage and assets growing faster than revenue. At the end of 2019, net income and free cash flow took a major dive for the company as debt levels spiked to all time highs.

Despite his continual reductions in the holding, Icahn still owns 8.98% of the company's shares outstanding, ranking him as the top fund holder. 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 purchased in the recent over the recent reporting period. It was valued at $17.37 billion and has seen a turnover rate of 3%. The top holdings are Icahn Enterprises LP (IEP), Herbalife Nutrition Ltd. (HLF), Cheniere Energy Inc. (LNG), Occidental Petroleum Corp. (OXY) and CVR Energy Inc. (CVI).

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

Disclosure: Author owns no stocks mentioned.

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