American Axle and Manufacturing (AXL: $10.60), a ~6% position, is up about 5% today. The positive results and raised guidance from Chrysler's 3Q announcement appear to be the main reason, highlighting the continuing improvement in the U.S. automotive industry. The 12.5 million shares short AXL, representing 20% of the float and short ratio of about 6 days, offers plenty of potential buyers of the stock should the fundamentals continue to improve.
AXL is trading at about 7.5x the consensus C11 EPS estimate of $1.39, relative to Dana Holding Corp (DAN: $14.75) at 15x and Federal Mogul Corp. (FDML: $19.80) at 11.5x. Assuming AXL's investments continue to pay-off and the automotive industry continues to recover, I would expect the C11 based P/E to expand to the low double digits, implying a stock price around $17.
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