By:
Nathan Zirpolo, AIM Student at Marquette University
Disclosure:
The AIM Equity Fund currently holds this position. This article was written by
myself, and it expresses my own opinions. I am not receiving compensation for
it and I have no business relationship with any company whose stock is
mentioned in this article.
Summary
• Dana Incorporated (NYSE:DAN) is a global provider of automobile
parts for cars ranging from golf carts to bulldozers. The company operates in
four segments, Light Vehicle, Commercial, Off-Highway and Power
Technologies.
• Dana’s Q3 net profit
increased 16.8% QoQ form $95m to $111m.
• The company has seen 12
consecutive quarters of year-over-year sales growth.
• Management believes
that the recent acquisition of Nordresa gives the company a direct relationship
with the OEM of their customers, creating less costs in their supply chain.
• With a recent stock
price surge due to a strong third quarter performance, Dana could be heading to
new 52-week.
Key
points:
When managing a sector that has outperformed the
portfolio over the prior years, there are more eyes looking over the seven to
ten names, looking for any news either sell or hold the companies. With a
general understanding that an economic slowdown is approaching, the Consumer
Discretionary sector’s returns could swing in the other direction due the
sectors returns being positively correlated a strong market. While Dana has increased
over 30% since the company was purchased in early October, the stock still
remains ‘in-play’.
Over the past year, the
company has completed acquisitions to increase their position in the electric
vehicle market. While they have supplied EV auto parts for high end cars, the
company does not believe they can be as profitable in the passenger car
business as they could with providing parts for other types of vehicles that
are covered in other segments. This was a main driver when pitched, and despite
the recent stock surge, this driver has not been played out and is not priced
into the stock price.
Over the past month, Telsa
has released their version of a pick-up truck while Ford released their version
of an all-electric Mustang. With over 200k Cybertrucks already preordered, the
shift to electric vehicles is larger than it has ever been before, creating
business opportunities for Dana, who can provide a wide range of electric auto
parts to a wide range of vehicles, as mentioned above.
In the past month, hedge
funds and other institutional investors have increase their holdings of DAN,
showing that the general sentiment in the market believes that the company will
prosper into the future.
What
has the stock done lately?
Since acquiring this
company in early October at $13.51, the firm has soared over 31% 5 in the past
quarter, and currently sits at $16.69. When comparing this increase to the
S&P 500 Index which increased 7.2% in the third quarter, Dana has increased
23.9% relative to the index during this time. The company is trading 0.9 times
more in the third quarter.
Past
Year Performance:
Dana has increased just over 10% over the
last year, however this can show that the AIM program purchased the company
near their floor, implying that there is still more room to grow. The company
saw a 52 week low of $11.57 in mid-August, slowing rallying to their current
price of $16.69. While Dana has seen a price increase of over 30% since pitched
just two months ago, there should no reason for concern that the stock will
return to the prices seen in August.
My Takeaway
Due to Dana’s stock price
surge paired with strong third quarter numbers, the current holding of Dana
should not be questioned, and should continue to be held by the program. After
reviewing the original pitch, the three drivers listed have affected the stock
price, thus not being priced in. The AIM program should continue to hold DAN as
they grow their EV segment.
