Following a deal with the management of Navistar International Corp (NYSE:NAV) that allows both him and fellow activist investor Mark Rachesky of MHR Fund Management to control up to 20% of the company each, billionaire Carl Icahn has reported a total of over 13 million shares of the stock in his portfolio. Following these most recent purchases Icahn is nearing 17% of the vehicle and vehicle parts company, and he may well continue buying close to the 20% threshold (see Icahn’s stock picks). Icahn will also, under the terms of the agreement, be able to nominate two members of Navistar International Corp (NYSE:NAV)’s Board of Directors.
Navistar International Corp (NYSE:NAV) recently had its new engine design fall short of federal environmental regulations, which has been disastrous for business in the short term. Operating losses in the truck and engine segments have offset growth in parts, and in the first six months of the current fiscal year (which ends in October) Navistar International Corp (NYSE:NAV) has lost $5.82 per share in continuing operations with additional losses in discontinued operations. Cash flow from operations was negative as well, and with the company engaged in significant capital expenditures and purchases of equipment it used nearly $600 million in cash. Navistar International Corp (NYSE:NAV) reported $1.2 billion in cash and marketable securities on its balance sheet; the remainder of its current assets are roughly in balance with its current liabilities. Wall Street analyst expectations for the forward fiscal year imply a forward P/E of 19. Given the company’s troubles, many market players have decided that it is overvalued even given activist involvement and so 24% of the float is held short.
We can see from our database of 13F filings from hundreds of hedge funds and other notable investors (which we use to help us research investment strategies, including our finding that the most popular small cap stocks among hedge funds outperform the S&P 500 by an average of 18 percentage points per year) that Icahn and Rachesky weren’t the only major investors in Navistar International Corp (NYSE:NAV) as of the end of March. Billionaire Mario Gabelli’s GAMCO Investors reported owning 4.6 million shares (find Gabelli’s favorite stocks) while Tiger Cub Rob Citrone’s Discovery Capital Management initiated a position of 3.5 million shares during Q1 (check out more stocks Citrone was buying).
The closest peers for Navistar include Oshkosh Corporation (NYSE:OSK), which Icahn had previously wanted to merge with the company, and PACCAR Inc (NASDAQ:PCAR).