Carl Icahn’s Bullish Bet on Electric Vehicles

U.S. President Joe Biden has united automakers and set an ambitious target for 50% of vehicles sold to be electric vehicles (EVs) by 2030. To accomplish this humongous task, traditional automakers must now convert to electric if they want to remain relevant.

Dana Inc. (

DAN, Financial) is a leading company which provides electrical drivetrains for vehicles. The company works with major car manufacturers which include General Motors (GM), Stellantis NV (STLA, Financial), Ford Motor Co (F), Daimler (XTER:DTF), Volkswagen (FRA:VOW, Financial), Deere & Co (DE, Financial), Caterpillar (CAT, Financial), Hyliion (HYLN, Financial) and more.

As they say, when there is a gold rush, don’t look for gold – sell shovels. A fantastic way to play this EV boom is to invest into companies which are providing the technical parts necessary for this mass conversion from gas guzzling engines to electric drivetrains.

Icahn’s Electrifying Bet

Legendary activist investor Carl Ichan has been loading up on shares of Dana since at least 2020 and now owns a massive 9.91% of the company! Ichan was first buying shares at an average price of $16 and then continued to add to the stock at $22. The stock is currently trading at close to this level ($21) at the time of writing:

As we can see in the below chart, more gurus have been buying the stock than selling it in recent quarters:

Competitive advantages

Investing into companies with a strong competitive advantage or “moat” is a strategy utilized by the greatest investors of all time, including

Warren Buffett (Trades, Portfolio) and Nick Sleep. Even a pick-and-shovel play can lose out if there are better competitors out there.

The company has two main advantages, from what I can gather:

• Patents – The company’s 10,000+ patents give them a vast amount of protection for various different technologies in the EV market.

• Relationships with auto manufacturers – The company’s strong and established customer base of leading manufacturers give them a “foot in the door” to grow business in the future.

Is the stock undervalued?

As a value Investor, I like to calculate an estimate of the intrinsic value of a company before investing. Thus, I have input the latest financial data into my discounted cash flow model for Dana stock. I have been conservative with revenue growth estimates, predicting 10% for next year (same as the prior year) and then 8% for the next four years after.

For the operating margin, I have projected this to increase from 4.42% to 7% in five years. However, I do expect margin compression in the short term thanks to inlation.

Plugging in these numbers, I get a fair value estimate of $23 per share. The stock is currently trading at $22, and thus appears to be fairly valued.

Final thoughts

Dana Inc. is a fantastic company with a strong customer base of established auto manufacturers and tailwinds from the macro policy changes pushing electrification of vehicles.

The company has strong competitive advantages with a plethora of over 10,000 patents and great relationships with legacy auto manufacturers.

The major risk to the company is competition from other suppliers, in addition to the elephant in the room that is Tesla. Tesla is vertically integrated and thus most likely will not need to partner with a company such as DANA inc.

Legendary Carl Ichan has been loading up on shares and the stock is fairly valued at these levels. Some investors may wish for a dip in share price to offer a margin of safety before buying, while others may see the price as fair at these levels. Either way the company has all the ingredients of a great long term investment.