After boosting the stake in Dana Inc. (DAN, Financial) during the third quarter, renowned investor Carl Icahn (Trades, Portfolio) disclosed this week he further increased his firm’s position by 0.05%.
The guru’s Florida-based firm, Icahn Capital Management, is known for taking activist positions in struggling companies and working with management to improve profitability as well as unlock value for shareholders. One of his more recent targets is Southwest Gas Holdings Inc. (SWX, Financial).
According to GuruFocus Real-Time Picks, a Premium feature, Icahn invested in 6,688 shares of the Maumee, Ohio-based auto parts company on Dec. 28. The stock traded for an average price of $22.73 per share on the day of the transaction.
His firm now holds 14.3 million shares total, which account for 1.44% of the equity portfolio. GuruFocus estimates Icahn has gained 17.86% on the investment since establishing it in the fourth quarter of 2020.
The company, which supplies axles, driveshafts, transmissions and electrodynamic, thermal, sealing and digital equipment for the automotive and trucking industries, has a $3.51 billion market cap; its shares were trading around $24.27 on Friday with a price-earnings ratio of 16.89, a price-book ratio of 1.89 and a price-sales ratio of 0.4.
Taking historical ratios as well as an adjustment for past performance and future earnings projections into consideration, the GF Value Line suggests the stock is modestly overvalued currently.
On Dec. 7, Dana announced it agreed to make two additions to its board of directors. One is Ichan’s son, Brett Ichan, and the other is Gary Hu, both of whom are portfolio managers at Icahn Capital. While the change was effective immediately, they will stand for election at the company’s 2022 annual meeting.
In a statement, Dana Chairman and CEO James Kamsickas expressed his appreciation for Icahn Capital’s “support and constructive engagement” as it advances in its strategic plan.
"Our ongoing board refreshment reflects a commitment to best-in-class corporate governance, and this agreement brings a direct shareholder perspective to the boardroom to support our long-term goal of sustainable value creation,” he said. “We look forward to working with Brett and Gary to advance our efforts."
Icahn also commented on the arrangement, saying he has had “productive conversations” with the company since establishing the investment and recognized the progress it has made despite the current operating challenges.
“We believe Dana's management has positioned the company to capture significant market opportunities ahead, especially with respect to electrification in mobility," he said.
The company also appointed Ernesto M. Hernandez to the board earlier this week, temporarily expanding it to 12 members before Raymond Mabus retires later this year. In exchange, Ichan Capital has agreed to support the company’s full slate of director nominees at the upcoming meeting.
GuruFocus rated Dana’s financial strength 4 out of 10. In addition to poor interest coverage, the low Altman Z-Score of 2.05 indicates the company is under some pressure since assets are building up at a faster rate than revenue is growing. The return on invested capital has also been eclipsed by the weighted average cost of capital, meaning the company is struggling to create value as it grows.
The company’s profitability fared better, scoring a 7 out of 10 rating. Although its margins are declining, Dana is supported by returns on equity, assets and capital that outperform over half of its competitors. It also has a moderate Piotroski F-Score of 6 out of 9, indicating operations are typical for a stable company, and a predictability rank of one out of five stars. GuruFocus data shows companies with this rank return, on average, 1.1% annually over a 10-year period.
With a 9.91% stake, Icahn is the company’s largest guru shareholder. Mario Gabelli (Trades, Portfolio), Richard Pzena (Trades, Portfolio), Chuck Royce (Trades, Portfolio), Jeremy Grantham (Trades, Portfolio), Paul Tudor Jones (Trades, Portfolio), Joel Greenblatt (Trades, Portfolio) and Barrow, Hanley, Mewhinney & Strauss also have positions in Dana as of the end of the third quarter.
Portfolio composition
Nearly 60% of Icahn’s $22.52 billion equity portfolio, which was composed of 17 stocks as of the end of the third quarter, was invested in the industrials sector. Energy had the second-largest representation with a weight of 19.87%.
As of the end of the three months ended Sept. 30, the investor’s largest holdings were Icahn Enterprises LP (IEP, Financial), Cheniere Energy Inc. (LNG, Financial), Occidental Petroleum Corp. (OXY, Financial), CVR Energy Inc. (CVI, Financial) and Newell Brands Inc. (NWL, Financial).
