Nelson Peltz’s Trian Fund Management continues to raise its exposure to Bank of New York Mellon Corp (NYSE:BK), purchasing another 273,000 shares at a price of $36.63 per share in a transaction dated January 28, according to a filing with the SEC. The latest move gives Trian 29.17 million shares, approximately 2.6% of all common shares, and is classified as an insider purchase due to the presence of Trian co-founder Edward Garden on the bank’s board, where he is a director. Garden was appointed to that post on December 1.
Trian Fund Management is an activist-focused fund founded in 2005 by Peltz, Garden, and Peter May. With just 11 holdings in their equity portfolio as of September 30, the fund has a focus on taking up strong positions in each company it invests in, and working with the company’s board to improve their operations with a focus on improving shareholder value. We analyzed the performance of Trian’s stock positions that are disclosed in 13F filings. Between 2006 and 2012 imitating Trian’s 13F portfolio would have returned an average of 72 basis points per month. S&P 500 Index returned an average of 45 basis points per month during the same period. Vanguard’s index funds are extremely popular among investors because most investors think that it isn’t possible to beat the market on average. This observation is valid for a large number of active fund managers but there are some exceptions like Warren Buffett and Nelson Peltz. Peltz mostly invests in larger cap stocks and manages to beat the market by unlocking value through corporate activism. That’s why we pay attention to his stock moves.
Trian was most recently involved in spurring Family Dollar Stores, Inc. (NYSE:FDO) (on the board of which, Garden was also a director) to merge with Dollar Tree, Inc. (NASDAQ:DLTR). After being a part of the successful shareholder vote to approve the merger on January 22, Trian sold most of their position a few days later.
In terms of their activist investing endeavors, Trian Fund Management may be in for its biggest fight yet as it prepares to take on the board of E I Du Pont De Nemours And Co (NYSE:DD) in an effort to replace four directors on that board. Their move is seen as bold and perhaps even brazen given DuPont’s general outperformance of the market over the past few years and a stock that is up 20% over the past year.
The latest purchase by Trian is their first move on Bank of New York Mellon Corp (NYSE:BK)’s stock since the third quarter of last year, when they raised their already formidable exposure in the company by another 52%. That made them the largest shareholder among funds we track on Insider Monkey, surpassing First Eagle Investment Management, which held 27.72 million shares as of September 30, Warren Buffett’s Berkshire Hathaway, which held 23.38 million shares, and Richard McGuire’s Marcato Capital Management, which held 17.77 million shares.
The move shows that Trian is still bullish on the stock, especially at the levels it has sunk to over the past month; Bank of New York Mellon Corp (NYSE:BK) is down over 12% since December 23 after cresting to a 3-year high. The move also comes a day after Bank of New York Mellon Corp (NYSE:BK) revealed that regulators were recommending to the SEC that they be charged with securities violations over alleged acts of foreign bribery which involved internships being granted to relatives of sovereign wealth fund officials. BNY Mellon has stated that they don’t expect the results of the investigation to materially affect their business one way or the other.
More importantly, they come after Bank of New York Mellon Corp (NYSE:BK) revealed seemingly lackluster results for the fourth quarter of 2014. While adjusted net income grew to $667 million for the quarter from $629 million in the fourth quarter of 2013, adjusted net revenue was down to $3.67 billion from $3.77 billion a year ago, and well off expected revenue of $3.80 billion.
Despite that, there is plenty to like about their future prospects. Once the Federal Reserve begins to slowly raise the record-low interest rates, BNY Mellon’s growing interest-earning assets will become much more valuable. BNY Mellon has also been successful at cutting costs thanks to pressure from investors like Trian. Their adjusted non-interest expenses for the fourth quarter were trimmed to $2.65 billion, their lowest levels since the third quarter of 2012, and that trend is expected to continue.
With Trian Fund Management still showing a bullish sentiment towards Bank of New York Mellon Corp (NYSE:BK), that should be a good indication that they feel confident in the steps the bank is taking, which investors should take note of, which is why we actively monitor such hedge fund activity.
Disclosure: None
