Institutions Like Visteon And So Should You

| About: Visteon Corporation (VC)

The stock of Visteon Corporation (NYSE:VC) is nearing its 52-week high of $61.50 by trading at $59.56 per share only days ahead of the release of its first quarter 2013 earnings report. Visteon Corporation is a supplier of automotive modules, systems, and climate, entertainment, and information components to major auto industry original equipment manufacturers around the world. Shares in VC continue to test new 52-week highs in a powerful nine month rally from an intra-day low of $27.05 per share on August 3, 2012. During that time, VC shares rose 121 percent to their current price range around the $60 per share level in an uptrend fueled significantly by the announcement of new executive leadership, accumulation by notable hedge funds, the announcement of a massive stock repurchase program, and profoundly resilient technical indicators in its chart pattern. By drilling down into each of these factors, the stellar price performance of VC is complemented by strong underlying fundamentals that make this a compelling stock to watch for an entry point around the announcement of its May 9 first quarter 2013 earnings report.

Visteon Corporation has undergone an odyssey of sorts since early August 2012 with several key events and strategic moves contributing to the impressive 121 percent gain in VC shares over that nine month period. On August 2, 2012, VC shares dropped over 10 percent after the company announced its second quarter 2012 earnings and the completion of the sale of its automotive lighting business to auto part company Varroc Group for $72 million in cash. The deal closed quickly after only being negotiated in the middle of March 2012 and was essentially the first of many strategic operational moves and a shake-up of Visteon's management and board of directors in the past three quarters that reveal a company that is evolving on many different levels. Less than two weeks after the earnings report and the announcement of the Varroc Group deal closing, Visteon announced that chief executive officer, president, and chairman Don Stebbins was stepping down from all three positions effective immediately. The company named board member Timothy Leuliette interim CEO, chairman, and president on that same day. The news about the change in the company's leadership on August 12 ignited a surge in share prices of more than 10 percent from a close of $38.80 on the Friday trading session before the weekend announcement to a closing price of $42.01 per share on August 13, 2012.

On October 1, Visteon's board of directors finalized the move by announcing that Leuliette was officially named the chief executive officer and president of the company. Visteon further announced that the positions of chairman of the board of directors and the chief executive officer would be divided and officially named a new board member, Francis Scricco, as the chairman of the company's board. The big shake-up of the VC executive team continued as Visteon replaced its chief financial officer by officially naming Jeffrey Stafeil to the position on October 31, 2012. The development coincided with the market's embrace of the third quarter 2012 earnings report and triggered another pop in VC's stock price of nearly 10 percent from a close of $44.10 on October 31 to finish the first trading session after the announcement by closing at $48.15. Clearly, the market embraced the new management's handling of the third quarter financial results and greeted VC's stock price with profound rallies.

Visteon's management team and board of directors rewarded its investors handsomely by announcing a $100 million share repurchase program in August 2012 that coincided with the second quarter earnings report. To further sweeten the deal for VC shareholders, the company's new management proved it is serious about acquiring its own equity by announcing an additional $200 million worth of share repurchases, to augment the initial $100 million program, on January 14, 2013. By reducing the float of 51.93 million shares by a total of $300 million, Visteon is showing its commitment to shareholders and confidence in its financial condition.

High profile investors seem to agree with Visteon's management about the prospects for its stock price. Several prominent hedge funds have taken significant stakes in VC and increased those positions considerably in late 2012 in the wake of the changes at the company. Eton Park Capital acquired around a million shares of VC stock in the fourth quarter of 2012, according to a report on Wall Street Journal's MarketWatch. Steven Cohen's hedge fund SAC Capital Advisors owns a reported 2.5 million share stake, which totals nearly five percent of Visteon, according to Morningstar. Notably, VC is the second-largest investment holding of Jeffrey Altman's Owl Creek Asset Management with a 2.6 million share position in the company, according to its most recent SEC 13-F filing. The confidence of hedge funds such as these investing so heavily in Visteon reveal the strong growth prospects for VC stock after the big changes that occurred at the company in the second half of 2012.

From the aspect of technical analysis, the VC chart shows it is nearing a breakout of its 52-week high after bouncing off a test of its 50-day exponential moving average in mid-April. The stock has resumed its ascent by rebounding around 15 percent from a low of $52.26 on April 18 to its current daily range at the $60 per share price level. Its 8-day and 20-day exponential moving averages are presently at $58.08 and $57.18, respectively, which suggests strong levels of support when taken in the context of the April tests of those indicators. With the stock trading around the $60 price level, shares are marginally closer to the 52-week high than they are the key exponential moving averages, which points to a breakout from its trading range in the near future with downside risk around its current 50-day EMA at $56.74.

Visteon will announce its first quarter 2013 earnings report on May 9 and the market's reaction to its most recent financial results will provide investors with more color on the effectiveness of the company's new management team. Clearly, several elite hedge fund managers are buying into VC's future as evidenced by the large share acquisitions in the months after the new executives and board members assumed their leadership positions at the company. The additional benefit to VC stockholders of the company's $300 million share repurchase program provides further incentive to investors looking to build a new position in Visteon by the company putting a bid under its own stock. From the perspective of fundamentals, investment fund sponsorship, and its chart pattern, VC shows signs it is on the verge of making new 52-week highs and continuing its powerful nine month rally. As a tier one supplier to Ford (NYSE:F) General Motors (NYSE:GM) and Chrysler Group I would expect impressive results following the likes of the rest of the industry.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.