Undoubtedly Carl Icahn is one of the best investors in the world and one of my favorite hedge fund gurus. He founded Icahn Capital LP, which had $31.89 billion under management at Dec. 31, 2014. The investor reported increasing his stake in Federal-Mogul Holdings Corporation (FDML, Financial), a $2.01 billion market cap, according to GuruFocus Real Time Picks.
Icahn's move
On March 26, Icahn purchased 17.48 million shares of the company for $13.15. As of today, the firm's share price is $13.44 and Mr. Icahn amasses 138.59 million shares, the value of the stake amounting to $1.86 billion.
Federal-Mogul Holdings Corporation supplies various components, accessories and systems to the manufacturers and servicers of vehicles and equipment worldwide. The firm’s shares lost 16.66% in a year-to-date basis and lost 28.33% of its market value in the last year.
Revenues rose by 6.02% but earnings per share abruptly decreased in the fourth quarter compared to the same quarter a year ago to -$1.23 from -$0.11. During the past fiscal year, the company has entered into a loss field, reporting -$1.11 vs $0.89 in the previous year. This year, Wall Street expects an improvement in earnings ($0.70 versus -$1.11).
Doubling size
Today, Federal-Mogul Powertrain, which is a division of the company, announced it will build a new facility for sealing and gasket products in the Nanchang Economic and Technological Development Zone in China. The idea is to satisfy the growing demand from Chinese OEMs to meet stringent environmental regulations.
Doubling the capacity of the company`s current sealing manufacturing operations in that region, the production is expected to begin next year, which should boost revenues based on the increased demand for vehicles.
Relative Valuation
Its price-to-book ratio of 2.40x indicates a premium versus the industry average of 1.73x while the price-to-sales ratio of 0.30x is below the industry average of 0.73x. While one ratio indicates that the stock is relative overvalued, the other indicates the opposite.
Final comment
In the article we focus on the famous American finance tycoon, Carl Icahn, who is known for his major influence on investing policy and skill in the markets, who is constantly seeking opportunities. Mario Gabelli and Murray Stahl are two prominent investors in Federal-Mogul Holdings Corporation, holding 6.03 million shares and 573.077 shares respectively at the end of 2014.
Disclosure: As of this writing, Omar Venerio did not hold a position in any of the aforementioned securities.
