Founded in November 2005, Nelson Peltz‘s Trian Partners is focused on finding undervalued and underperforming companies that could be given an effective makeover by the fund’s experienced managers in order to enhance the value of the company. The fund’s activist investing strategy demands a long-term commitment from it, as the fruit of its structural changes do not ripen overnight. Naturally, this means that many of the fund’s investments are held for a long period, which gives retail investors ample time to jump on the bandwagon and ride the fund’s coattails to what will hopefully amount to positive returns. Hence, our continuous search for top investment ideas has today led us to evaluate the long-term equity picks of Trian Partners.
At Insider Monkey, we track more than 785 hedge funds, whose 13F filings we analyze as part of our small-cap strategy. Our research has shown that imitating a portfolio that includes the 15 most popular small-cap stocks among hedge funds can outperform the market by as much as 95 basis points per month on average (see more details here).
#5 Legg Mason Inc (NYSE:LM)
– Shares Owned by Trian Partners (as of December 31): 11.04 Million
– Value of Holding (as of December 31): $433.10 Million
Trian Partners initiated a stake in the Baltimore-based investment management company at the end of 2009. Although up by 20% since then, Legg Mason Inc (NYSE:LM)’s stock is trading about 42% lower than the all-time high of $59.40 that it reached in February of last year. Analysts at Credit Suisse are bullish on the company, as they recently upgraded the stock to ‘Outperform’ from ‘Neutral’ and set a price target of $49 on it, which suggests upside potential of about 25%. Legg Mason’s share count is expected to be reduced by 19% during the next two years, which should give a boost to the stock price. In addition, the stock’s current valuation is also cheap, with shares trading at only 8-times 2017 earnings, a 35% discount from what the company’s peers are trading at. Another firm believing in Legg Mason Inc (NYSE:LM)’s future prospects is Mario Gabelli‘s GAMCO Investors, which holds about 3.97 million shares of the company.
#4 Wendys Co (NASDAQ:WEN)
– Shares Owned by Trian Partners (as of December 31): 40.79 Million
– Value of Holding (as of December 31): $439.34 Million
According to Trian’s latest filing, the fund owns about 14.92% of Wendys Co (NASDAQ:WEN)’s outstanding stock, a position which it has held in its portfolio since the first quarter of 2011. The company is currently undergoing a transformation whereby it is re-imaging its stores and also selling a significant number of them to franchisees. The stock is up by about 11.3% since the announcement of the restaurant operator’s financial results for the fourth quarter and full 2015 year on February 9. Ken Griffin‘s renowned managed futures fund Citadel Investment Group boosted its Wendys Co (NASDAQ:WEN) holding by 52% to 4.84 million shares during the October-to-December period.
Trian Partners’ top three long-term holdings are investigated on the next page.