Billionaire investor Carl Icahn (Trades, Portfolio), who leads New York-based Icahn Capital Management, disclosed last week he upped his Hertz Global Holdings Inc. (HTZ, Financial) stake by 68.83% to a total 40.9 million shares.
A renowned activist investor, the guru is known for taking positions in struggling, beaten-down companies with the goal of encouraging management to make changes to improve profitability as well as create value for shareholders.
According to GuruFocus Real-Time Picks, a Premium feature, Icahn picked up 16.7 million more shares of the Estero, Florida-based company on July 12, impacting the equity portfolio by 1.05%. The stock was trading for an average price of $15.31 per share.
GuruFocus data shows he has lost an estimated 64% on the investment since third-quarter 2014.
The car rental company has a $1.29 billion market cap; its shares were trading around $15.29 on Monday with a price-book ratio of 1.41 and a price-sales ratio of 0.14.
The median price-sales chart shows the stock is trading below its historical average, suggesting it is undervalued.
In June, Hertz Global announced a rights offering to raise up to $750 million. According to the terms of the offering, each shareholder received one transferable subscription right for each share held as of 5 p.m. ET on June 24. Each right is equal to 0.688285 shares of the company’s common stock for a subscription price of $12.95 per whole share of common stock. Investors who took full advantage of the offer were able to obtain additional shares as well.
The offering, which commenced on June 26, expired on July 12. The funds raised will go toward paying down debt.
The company will release its second-quarter results after the market closes on Aug. 6.
GuruFocus rated Hertz’s financial strength 3.7 out of 10. As a result of issuing approximately $1.2 billion in new long-term debt over the past three years, the company has poor interest coverage. In addition, the weak Altman Z-Score of 0.50 warns the company is in danger of going bankrupt as it has recorded an operating income loss over the past three years.
The company’s profitability and growth did not fare much better, scoring a 4 out of 10 rating. In addition to a declining operating margin, Hertz is being weighed down by poor returns that underperform a majority of competitors. It does, however, have a moderate Piotroski F-Score of 4, which indicates operations are stable, and a business predictability rank of one out of five stars. According to GuruFocus, companies with this rank typically see their stocks gain an average of 1.1% per annum over a 10-year period.
As of the end of the first quarter, Icahn was by far the company’s largest guru shareholder with 28.84% of outstanding shares, which represented 1.75% of the equity portfolio. Other top guru investors include Jim Simons (Trades, Portfolio)’ Renaissance Technologies, Mario Gabelli (Trades, Portfolio), Larry Robbins (Trades, Portfolio), Chuck Royce (Trades, Portfolio), Lee Ainslie (Trades, Portfolio), Paul Tudor Jones (Trades, Portfolio), Murray Stahl (Trades, Portfolio), Philippe Laffont (Trades, Portfolio) and Joel Greenblatt (Trades, Portfolio).
Portfolio composition
Icahn’s $24.10 billion equity portfolio, which consists of 16 positions as of the end of the first quarter, is heavily invested in the industrials sector with a weight of 59.32%.
The guru’s top five holdings as of the end of the first quarter were Icahn Enterprises LP (IEP, Financial), CVR Energy Inc. (CVI, Financial), Herbalife Nutriton Ltd. (HLF, Financial), Cheniere Energy Inc. (LNG, Financial) and Caesars Entertainment Corp. (CZR, Financial).
Disclosure: No positions.
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