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.
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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.
Navistar’s market share endured a serious slump in 2012, when the engines the company was designing and manufacturing did not comply with the tough new federal standards for diesel-engine exhaust that were implemented around that time. However, 2013 marked a new beginning for Navistar, as it managed to fix its engine problems by using exhaust-treatment components and popular engine models constructed by Cummins Inc., which indeed assisted the company in recovering its market share. Some analysts claim that Navistar has been steadily recovering from its near failure in 2012, but that the full recovery is still ahead. As the U.S. economy has been gaining pace lately, the demand for all manner of commercial trucks has been increasing as well. Hence, Navistar will definitely benefit from this positive outlook on the U.S. economy if it manages to properly run its activities and operations. In addition to that, the company has been focusing on improving its core North American Truck and Parts businesses recently by closing or divesting non-core/non-strategic businesses. Navistar has been constantly seeking opportunities to restructure its business and increasr the efficiency of its operations in order to optimize its cost structure.
Nevertheless, even though Navistar’s cost-cutting initiatives and margin improvements assisted the company in narrowing its loss for the fiscal second quarter of 2015 that ended on April 30, analysts’ expectations were still missed. But there is no doubt that Navistar has experienced great improvements lately, with an adjusted net loss from continuing operations of $0.57 per share, substantially narrower than the adjusted net loss of $1.45 per share reported in the same quarter a year ago. Navistar reported revenues of $2.66 billion for the fiscal second quarter of the year, lower by 1.9% year-over-year. Despite missing the expectations for the most recent quarter, which negatively influenced the company’s share price, Navistar expects that 2016 will be a strong year for the North American industry and for the company itself. Precisely, Navistar is set to take advantage of the current and potential favorable market conditions and achieve its long-awaited turnaround. Within our database, the activist hedge fund managed by the aforementioned Carl Icahn, Icahn Capital LP, represents the largest investor in Navistar International Corporation (NYSE:NAV), with 16.27 million shares.
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