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.
#3 E I Du Pont De Nemours And Co (NYSE:DD)
– Shares Owned by Trian Partners (as of December 31): 20.22 Million
– Value of Holding (as of December 31): $1.35 Billion
Shares of the $55.78 billion science and technology-based company are up by nearly 30% since it found a long-term place in Trian’s portfolio in the second quarter of 2013. However, the fund slashed its stake in the company by 21% in the fourth quarter of 2015, which likely was motivated by profit-taking, as shares rose by a hefty 38% during this period. E I Du Pont De Nemours And Co (NYSE:DD) agreed to merge with Dow Chemical Co (NYSE:DOW) late last year, but according to sources Dupont may receive a bid from German chemicals giant BASF SE (ADR) (OTCMKTS:BASFY) which could make it rethink its planned merger with Dow Chemical. Jonathon Jacobson‘s Highfields Capital Management holds about 12.62 million shares of E I Du Pont De Nemours And Co (NYSE:DD).
#2 PepsiCo, Inc. (NYSE:PEP)
– Shares Owned by Trian Partners (as of December 31): 18.32 Million
– Value of Holding (as of December 31): $1.83 Billion
Trian Partners has held a position in PepsiCo, Inc. (NYSE:PEP) since the fourth quarter of 2012. In order to combat the downswing in soda consumption (sales in the U.S have fallen every year for the last ten years), PepsiCo recently released its new cola ‘1893’, named after the company’s year of inception. The drink contains all-natural ingredients, catering to millennials predilection for healthier food and beverage choices. Shares of the $154 billion non-alcoholic beverage giant have risen by about 8.5% over the last 12 months. Boykin Curry‘s Eagle Capital Management believes in PepsiCo, Inc. (NYSE:PEP)’s future as well, as it raised its stake in the company by 4% to 8.39 million shares during the fourth quarter.
#1 Mondelez International Inc (NASDAQ:MDLZ)
– Shares Owned by Trian Partners (as of December 31): 48.03 Million
– Value of Holding (as of December 31): $2.15 Billion
Mr. Peltz’s fund has been betting on Mondelez International Inc (NASDAQ:MDLZ) since the first quarter of 2011. Another renowned activist investor bullish on the snack food and beverage company is Bill Ackman of Pershing Square, as Mondelez was his fund’s third-largest equity holding at the end of 2015. According to a letter to his investors, Mr. Ackman believes that compared to its peers, there is vast room for improvement in Mondelez’s profit margins. However, Mr. Ackman recently liquidated about 20.42 million shares of Mondelez International Inc (NASDAQ:MDLZ) for portfolio rebalancing purposes as his fund continues to struggle under the crushing weight of its sinking Valeant Pharmaceuticals Intl Inc (NYSE:VRX) holding. Mondelez’s stock is up by nearly 12.6% over the past year, despite falling by 8% thus far in 2016.