This article discusses the top 8 stock picks of billionaire Nelson Peltz’s Trian Partners at the end of the second quarter.
Billionaire Nelson Peltz is among the very few notable hedge fund managers on Wall Street today who can claim to have made it big in the investment management business without taking a conventional path. Unlike most hedge fund managers, most of whom have an MBA or a CFA credential attached to their name or an undergraduate or master’s degree from a prestigious institution, Mr. Peltz dropped out of his undergraduate degree at Wharton to become a ski instructor in Oregon.
He soon left that profession and joined his father at A. Peltz & Sons, a frozen food and produce distribution business started by his grandfather in 1896. He built A. Peltz & Sons into a successful large-scale food distributor and took it public in 1973. Within a few years, he sold that business and used the proceeds to buy Triangle Industries Inc., which he again built into a Fortune 100 industrial company and sold in 1988. Since then, he has been actively buying and selling troubled companies, mainly in the consumer space, along with his long-time collaborator Peter May. In 2005, Mr. Peltz, along with Mr. May and Ed Garden, founded the activist hedge fund Trian Partners. Since its inception, Trian Fund Management has completed 35 deals, most of which involved the fund having an active stake in a company and asking its management to change its business or operating structure.
In a recent episode of “Bloomberg Wealth with David Rubenstein,’’ Mr. Peltz was interviewed by The Carlyle Group founder David Rubenstein. During that interview, Mr. Peltz was asked that earlier people who wanted to make changes at a company were called ‘raiders’, ‘activists’, and someone who is ‘no good to America,’ and if those views have changed now, to which he replied:
“Investors want their portfolios to perform. And they haven’t performed. What people don’t understand is that we are making their portfolios better. We are making mega-cap stocks. Nobody is going to buy P&G. Nobody is going to buy Unilever. There are only a few people who can have an impact on a company like that. Those stocks are probably in 50% of pension fund portfolios. That’s what we need to do.”
Trian Partners’ Portfolio
According to Trian Partners’ last filed Form ADV, the firm manages assets worth over $7.5 billion for 32 clients. Being an activist fund, Trian Partners has always run a concentrated portfolio, usually holding a stake in 10 companies or less. The second quarter of 2022 was no different. At the end of June, the fund held stakes in only 8 companies, with the aggregate value of those holdings amounting to $4.55 billion, according to its most recent 13F filing submitted with the SEC. Trian Partners’ top four stock picks – Sysco Corporation (NYSE:SYY), Janus Henderson Group plc (NYSE:JHG), Invesco Ltd. (NYSE:IVZ), and Ferguson plc (NYSE:FERG) – alone accounted for over 70% of the aggregate value of its 13F portfolio.
Nelson Peltz of Trian Partners
Our Methodology
At Insider Monkey, we track the portfolios of 895 prominent hedge funds. Our research has shown that over the long term, the consensus stock picks of top-performing hedge funds beat the broader market returns by a wide margin. For this article, we selected the top 8 stock picks based on the most recent 13F filing submitted by Trian Partners with the SEC for the quarter ending June 30.
8 Best Stocks to Buy According to Billionaire Nelson Peltz
8. The Procter & Gamble Company (NYSE:PG)
Trian Partners’ Stake Value: $785,000
Percentage of Trian Partners’ 13F Portfolio: 0.01%
Number of Hedge Fund Holders: 71
Trian Partners has had an interesting relationship with The Procter & Gamble Company over the past few years. The fund initiated a stake in the global consumer packaged goods major in November 2016, when the company’s stock had languished in the $60 to $80 range for close to a decade. Having initiated its stake, the fund proceeded to present the company with a plan to restructure its operations.
After those suggestions were not taken seriously by The Procter & Gamble Company’s board, Trian Partners led a proxy fight, which it won, and as a result, Mr. Peltz got a seat on the company’s board. Mr. Peltz held on to his board seat until October 2021, following which he resigned, and Trian Partners sold almost all of its holdings in the company. Though the fund said it had sold its entire stake in the company in May 2022, the 13F filing shows that it still held a paltry 5,457 shares of The Procter & Gamble Company at the end of June.
On August 2, analysts at Barclays reiterated their ‘Overweight’ rating on the stock but lowered their price target on it to $154 from $157, representing a potential upside of 12.25% from the stock’s last closing price.
7. Mondelez International, Inc. (NASDAQ:MDLZ)
Trian Partners’ Stake Value: $1,008,000
Percentage of Trian Partners’ 13F Portfolio: 0.02%
Number of Hedge Fund Holders: 48
Like it announced selling its holdings in The Procter & Gamble Company, Trian Partners also announced in May that it had sold its entire stake in Mondelez International, Inc., but the recent regulatory filing shows that it held 16,239 shares of the confectionaries giant as of June 30. Trian Partners reported a stake in Mondelez International, Inc. for the first time in its 13F filing for the first quarter of 2011. Mr. Peltz joined the company’s board in January 2014 and served as a board member until March 1, 2018, when he left his board seat due to other commitments and bequeathed it to Trian Partners’ other cofounder Mr. May.
Mondelez International, Inc. has had a long history of consistently paying dividends to its shareholders and has increased its dividend every year for the last 8 years. On July 27, along with its second-quarter earnings release, the company announced a 10% hike in its quarterly dividend to $0.385, which translates into an annual dividend yield of 2.54% based on its current stock price.
6. General Electric Company (NYSE:GE)
Trian Partners’ Stake Value: $256,375,000
Percentage of Trian Partners’ 13F Portfolio: 5.63%
Number of Hedge Fund Holders: 49
Though Trian Partners upped its stake in General Electric Company by a trivial amount of only 494 shares in Q2, other hedge funds covered by Insider Monkey showed much more confidence in the company during that period. These included billionaire Jim Simons’ Renaissance Technologies, which increased its holdings by 267% to 4.325 million shares and Ken Griffin’s Citadel Investment Group, which boosted its stake by 237% to 1.466 million shares. Trian Partners disclosed initiating a stake in the industrial giant during the second quarter of 2015. In addition, its founding partner Edward ‘Ed’ P. Garden has served as an independent director on the company’s board since October 2017.
General Electric Company’s stock has never been able to fully recover from the massive slump it experienced beginning in early 2017 and still finds extreme resistance around the $100 level. On August 25, Hyliion Holdings (NYSE:HYLN), an EV company that designs and sells electrified powertrain solutions for the commercial vehicle industry, announced that it has agreed to purchase General Electric Company’s new Karno hydrogen and fuel agnostic, capable generator. As part of the deal, the former will pay the latter $15 million in cash and around $22 million in common stock, which will give General Electric Company almost 3% stake in the EV company.
5. The Wendy’s Company (NASDAQ:WEN)
Trian Partners’ Stake Value: $478,293,000
Percentage of Trian Partners’ 13F Portfolio: 10.51%
Number of Hedge Fund Holders: 28
Trian Partners has a long history with The Wendy’s Company. The fund has held a stake in the company since 2005, the same year in which th fund was founded. In addition, Mr. Peltz has been a board member of the company since 2008; his son Matthew Peltz also joined the company’s board in 2015. Trian Partners and its associates own over 19% of The Wendy’s Company and currently have three fund representatives -including Mr. Neslon Peltz and Mr. Matthew Peltz – on the company’s 11-member board.
In May, the fund revealed through a filing that it was exploring potential deals with The Wendy’s Company to ‘enhance shareholders value’, which may include taking the company private, a merger or acquisition.
On August 11, a day after the company reported its fiscal 2022 second-quarter earnings, analysts at Barclays reiterated their ‘Overweight’ rating on the stock. They also upped their price target on it to $24 from $23, representing a potential upside of over 24% from the stock’s last trading price.
4. Sysco Corporation (NYSE:SYY)
Trian Partners’ Stake Value: $744,868,000
Percentage of Trian Partners’ 13F Portfolio: 16.37%
Number of Hedge Fund Holders: 32
Sysco Corporation has been one of the best-performing stock picks of Trian Partners in the last few years. Since the fund disclosed initiating a stake in the food services company in the second quarter of 2015, Sysco Corporation’s stock has more than doubled. The results are even more phenomenal if one includes the dividend returns from the company since then. Sysco Corporation currently pays an annual dividend of $1.96 per share, which translates into a forward annual dividend yield of close to 2.5% based on the stock’s last closing price.
Trian had initiated a stake in the company because of its “stable growth, scale relative to peers, well-established and trusted brand, and high cash flow generation.” In addition, Trian Partners’ Nelson Peltz and Josh Frank served on Sysco Corporation’s board for six years until August 2021. Three months before their resignations Sysco Corporation had announced its new multi-year strategic plan, with intentions to grow its sales 1.5 times faster than its peer group, funded by $750 million in gross cost savings the company hopes to realize by FY 2024.
For its fiscal year 2022 fourth quarter, the company reported non-GAAP EPS of $1.15 on revenue of $19 billion on August 9, beating analysts’ expectations by $0.04 and $710 million, respectively.
3. Janus Henderson Group plc (NYSE:JHG)
Trian Partners’ Stake Value: $749,212,000
Percentage of Trian Partners’ 13F Portfolio: 16.46%
Number of Hedge Fund Holders: 23
Founded in 1934, Janus Henderson Group plc (NYSE:JHG) is a London-based global asset manager that boasts combined assets under management (AUM) of close to £250 billion ( almost$300 billion) as of June 30, 2022. Among hedge funds covered by Insider Monkey, Trian Partners was Janus Henderson Group plc (NYSE:JHG) largest shareholder at the end of Q2, followed by John W. Rogers’s Ariel Investments, which held 3.53 million shares, and billionaire Ken Fisher’s Fisher Asset Management, which owned 1.65 million shares.
Trian initiated its stake during the second quarter of 2020, and in February this year, the company announced the appointment of Trian’s Nelson Peltz and Ed Garden on its board. At the time of joining Janus Henderson Group plc’s (NYSE:JHG) board, Mr. Peltz and Mr. Garden commented:
“As the Company’s largest shareholder, Trian believes strongly in the future of Janus Henderson. We see numerous operating and strategic opportunities ahead and look forward to working with the Janus Henderson Board and its leadership team to help Janus Henderson create significant long-term value for the benefit of all stakeholders.”
Following a rapid rise from April 2020 until November 2021, Janus Henderson Group plc’s (NYSE:JHG) stock seems to have fallen from a cliff as it has lost more than half its value from the $48.55 lifetime high it made last year. 4 of the 6 analysts on Wall Street who cover the stock currently have a ‘Sell’ rating on it.
2. Invesco Ltd. (NYSE:IVZ)
Trian Partners’ Stake Value: $899,387,000
Percentage of Trian Partners’ 13F Portfolio: 19.76%
Number of Hedge Fund Holders: 25
Apart from Janus Henderson Group plc (NYSE:JHG), Invesco Ltd. was another asset manager in which Trian Partners initiated a stake during the second quarter of 2020. However, the trajectory that both these asset management companies and their stocks have followed since then has been quite different. Invesco Ltd. manages close to $1.5 trillion in assets and gave board seats to Mr. Peltz and Mr. Garden immediately after Trian Partners initiated their stake.
After joining Invesco Ltd.’s board, Mr. Peltz and Mr. Green managed a quick turnaround, with the company’s earnings and operating margins improving substantially. In February, both Mr. Peltz and Mr. Garden resigned from the board but remain confident about the company’s future prospects as Trian Partners’ upped their stake in Invesco Ltd. by 4% to 55.75 million shares in Q2.
Although Invesco Ltd.’s stock has fared better than Janus Henderson Group plc’s (NYSE:JHG) over the past few quarters, it is still trading at a substantial discount to close to the $30 mark it reached last year. Additionally, funds tracked by Insider Monkey that disclosed a stake in Invesco Ltd. have also fallen significantly to 25 at the end of June this year compared to 40 at the same time last year.
1. Ferguson plc (NYSE:FERG)
Trian Partners’ Stake Value: $1,420,034,000
Percentage of Trian Partners’ 13F Portfolio: 31.2%
Number of Hedge Fund Holders: 32
Trian Partners further raised its holding in Ferguson plc (NYSE:FERG) during the second quarter by 13% to 12.83 million shares, which ensured that the British-American plumbing giant remained the fund’s top stock pick at the end of that period. Hedge funds tracked by Insider Monkey that disclosed initiating a stake in Ferguson plc (NYSE:FERG) during Q2 included Ricky Sandler’s Eminence Capital and David Greenspan’s Slate Path Capital.
In June, shares of Ferguson plc (NYSE:FERG) rose amid rumors that the company was in talks with a potential buyer for its takeover. However, those rumors were put to rest immediately.
On Setember 2, Trian Partners released a statement announcing that it would be closing its UK-based investment arm Trian Investors 1 and distributing the £440 million in assets it manages, which includes holdings in Ferguson plc (NYSE:FERG), to shareholders. According to Trian Partners:
“The Redemption will allow each shareholder to determine the most opportune time to realise their exposure to ULVR and/or FERG (and, in the case of FERG, taking into consideration its potential eligibility for inclusion in various U.S stock indices, including the S&P 500 Index);
and
The traded market in FERG and ULVR shares is significantly more liquid when compared to trading in the Company’s shares.”
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This article is originally published at Insider Monkey.
