What Nelson Peltz’s Involvement Signals for SYSCO Corporation (SYY)?

Therefore, Peltz’s involvement in SYSCO Corporation (NYSE:SYY) leaves a lot of room for speculations and rumors. Peltz is a famous activist, who is always in the spotlights on the back of his activist campaigns involving companies like E I Du Pont De Nemours And Co (NYSE:DD), PepsiCo, Inc. (NYSE:PEP), and Mondelez International Inc (NASDAQ:MDLZ). Peltz obtained board representation and has been pushing for spin-offs in most of his campaigns and proxy fights.

As a general rule, the involvement of an activist investor increases the popularity of a company and motivates piggybackers to buy shares. The data show that usually activist hedge funds generate returns higher than their passive peers, by pushing companies for changes capable of unlocking shareholder value. Hence, smaller investors try to get a piece of the action and go long on the back of an activist campaign. However, there is an even easier way to mimic not only activist investors, but the hedge fund industry as a whole. Through extensive research, we determined that most popular small-cap ideas of a select group of investors can beat the market by double digits per year. Based on this research, we compiled a strategy that involves imitating 15 most popular small-cap stocks among hedge funds. This approach has generated cumulative returns of over 123% since August 2012 and beat the market by around 65 percentage points (see more details here).

When it comes SYSCO Corporation (NYSE:SYY), it looks like hedge funds have been bullish prior to Peltz’s involvement. At the end of March, a total of 37 funds from our database held around $2.13 billion worth of stock, representing around 9.5% of the company. During the first quarter these numbers surged from 24 funds holding only $1.93 million in stock. Another shareholder of Sysco with a substantial stake is Donald Yacktman’s Yacktman Asset Management, which added 2.56 million shares and raised the stake to 33.96 million shares during the second quarter. Ric Dillon’s Diamond Hill Capital also inched up its holding to 6.31 million shares during the same period.

With this in mind, taking into account a bullish sentiment from hedge funds and an activist campaign on the horizon, it looks like SYSCO Corporation (NYSE:SYY) represents a profitable bet for the long-term. We will monitor Peltz’ further moves and will keep you updated.

Disclosure: none