In a recently-amended Form 4 filing with the SEC, Mark Rachesky’s MHR Fund Management disclosed three purchases of Navistar International Corporation (NYSE:NAV)‘s stock between July 22 and July 24, amounting to 800,000 shares in total. Consequently, the hedge fund’s overall position has increased to 14.98 million shares.
MHR Fund Management LLC is an activist hedge fund established by Mark Rachesky in 1996. The investment firm employs a control-focused, private equity investing approach and focuses on distressed and undervalued middle-market companies. Rachesky’s hedge fund engages in a rigorous, due diligence-focused investment process, putting strong emphasis on downside protection by exploiting its industry knowledge and analytical capabilities. Rachesky had worked for the reputable activist investor, Carl Icahn, for six years prior to establishing his own shop in 1996. Rachesky learned Icahn’s style of investing and gained tremendous experience investing in distressed companies. As a result, MHR Fund Management is also well-known for utilizing the bankruptcy or restructuring process to enhance the capital structure and cost structure of the companies it invests in. As stated by its most recent 13F filing with the SEC, MHR Fund Management manages a public equity portfolio worth $2.83 billion.
Following activist funds like Mark Rachesky is important because it is a very specific and focused strategy in which the investor doesn’t have to wait for catalysts to realize gains in the holding. A fund like Rachesky’s MHR Fund Management can simply create its own catalysts by pushing for them through negotiations with the company’s management and directors. In recent years, the average returns of activists’ hedge funds has been much higher than the returns of an average hedge fund. Furthermore, we believe do-it-yourself investors have an advantage over activist hedge fund investors because they don’t have to pay 2% of their assets and 20% of their gains every year to compensate hedge fund managers. We have found through extensive research that the top small-cap picks of hedge funds are also capable of generating high returns and built a system around this premise. In the 34 months since our small-cap strategy was launched it has returned over 139% and beaten the S&P 500 ETF (SPY) by more than 80 percentage points (read more details).
Navistar International Corporation (NYSE:NAV) is a leading manufacturer of commercial trucks, buses, defense vehicles, and engines. Specifically, the company manufactures International brand commercial trucks, MaxxForce brand diesel engines, IC Bus school and commercial buses, and Workhorse brand chassis for motor homes and step vans. At the same time, the company is a private label designer and manufacturer of diesel engines for the pickup truck, van, and SUV market. The shares of Navistar have plummeted by over 47% since the beginning of the current year. However, the company has undergone notable improvements throughout the last few years, including new cost-reduction moves like an enterprise-wide reduction in its workforce, which might allow the stock to achieve a turnaround given the positive outlook on the U.S. economy.