Famed activist investor Nelson Peltz founded Trian Partners in 2005 and has built it into a financial powerhouse that oversees more than $12 billion in assets under management. The fund’s equity portfolio was comprised of ten stocks spread among a number of sectors as of December 31, but with large exposure to consumer staples stocks, which accounted for approximately 47% of the portfolio’s value. Insider Monkey calculates a fund’s stock picking skill by looking at the weighted average returns of its long positions in companies with a market cap that exceeds $1 billion, based on the size of those positions at the beginning of each quarter. According to our data, all ten of the stocks held by Trian qualified and these stocks generated a modest 0.2% return during the first quarter. In this article we’ll take a look at five of those stocks and find out how they fared individually during the quarter.
At Insider Monkey, we track around 785 hedge funds and institutional investors. Through extensive backtests, we have determined that imitating some of the stocks that these investors are collectively bullish on can help retail investors generate double digits of alpha per year. The key is to focus on the small-cap picks of these funds, which are usually less followed by the broader market and allow for larger price inefficiencies (see more details about our small-cap strategy).
#5 Pentair plc. Ordinary Share (NYSE:PNR)
Shares Owned by Trian Partners (as of December 31): 13.7 million
Value of Holding (as of December 31): $677 million
Having slid by as much as 14.5% by mid-February, Pentair plc. Ordinary Share (NYSE:PNR) recovered quickly and finished the first quarter up by 10.3%. At the end of February, the British industrial manufacturing company announced a quarterly dividend payment of $0.33 per share for the first and second quarters of 2016 and a $0.34 per share payment for the remaining two quarters of the year. This is the 40th consecutive year that Pentair has increased its dividend payments. Pentair released its first quarter results on April 26, beating consensus estimated with adjusted earnings per share of $0.76, though the results were flat year-over-year. Revenue on the other hand was by 7% to $1.60 billion and also topped estimates. Pentair plc. Ordinary Share (NYSE:PNR) was not overly popular among the hedge funds followed by Insider Monkey, with only 19 of them having reported a stake in the company as of the end of 2015, down from 23 a quarter earlier. Larry Robbins‘ Glenview Capital indicated a holding of 3.57 million shares of Pentair as of December 31, down by 36% over the fourth quarter.
#4 Bank of New York Mellon Corp (NYSE:BK)
Shares Owned by Trian Partners (as of December 31): 30.9 million
Value of Holding (as of December 31): $1.28 billion
Bank of New York Mellon Corp (NYSE:BK) ended the first quarter down by 10%, although at one point it was down by 20% amid the wider market sell off which hit the banking sector particularly hard. The main factor behind the trend reversal was the company’s fourth quarter earnings report that surpassed analysts’ expectations. The company posted revenue of $3.72 billion, pretty much in-line with analysts’ projections of $3.75 billion, while earnings stood at $0.68 per share, topping estimates of $0.64. At the end of 2015, roughly 13% of Bank of New York Mellon’s common stock was held by 49 top hedge funds in our system. Warren Buffett is also keeping tabs on Bank of New York Mellon Corp (NYSE:BK), as Berkshire Hathaway reported ownership of 20.1 million shares of the company worth $829 million at the end of the fourth quarter.
Turn the page to find out about three other stocks that delivered mixed returns for Mr. Peltz in the first quarter.
#3 E I Du Pont De Nemours And Co (NYSE:DD)
Shares Owned by Trian Partners (as of December 31): 20.2 million
Value of Holding (as of December 31): $1.35 billion
Like most U.S. stocks, E I Du Pont De Nemours And Co (NYSE:DD) started the year on a downtrend which continued until the end of January, when the chemical giant reported fourth quarter results that helped lift the stock. Revenue came in at $5.3 billion, down by approximately 9% year-over-year, and adjusted earnings stood at $0.27 per share, while analysts had projected $5.41 billion in revenue and EPS of $0.26. The figures helped prop up the stock to a small loss of 4.3% for the quarter. E I Du Pont De Nemours And Co (NYSE:DD) is currently in the process of merging with Dow Chemical Co (NYSE:DOW), in a $130 billion deal that is expected to be completed by the end of 2016. Some hedge funds sought to distance themselves from Du Pont during the fourth quarter of 2015, as the number of firms in our database which were long the stock decreased to 35 from 41. Highfields Capital Management, run by Jonathon Jacobson, reported an 11% increase to its stake in DuPont during the fourth quarter, to 12.6 million shares.
#2 Mondelez International Inc (NASDAQ:MDLZ)
Shares Owned by Trian Partners (as of December 31): 48 million
Value of Holding (as of December 31): $2.15 billion
Mondelez International Inc (NASDAQ:MDLZ) shares are currently down by 4% for the year, having suffered an 18.6% correction in the first five weeks of 2015, which was trimmed to 10% by the end of the first quarter. Mondelez recently announced a partnership with Alibaba Group Holding Ltd (NYSE:BABA) that will help it sell its most famous products on the latter’s online marketplace, Tmall. The company also said that it plans to offer exclusive products on the platform in an attempt to expand its reach in China. Mondelez International announced its first quarter results on April 27, delivering $6.46 billion in revenue, down by 16.8% year-over-year, but beating estimates slightly. The company’s operating income margin improved by 80 basis points to 11.2%, which allowed operating income to fall by just 11% despite the wider revenue drop. The popularity of Mondelez International Inc (NASDAQ:MDLZ) among elite hedge funds took a tumble during the fourth quarter, as only 57 of them reported a stake in the company, down from 69 at the end of September. Bill Ackman‘s Pershing Square also held a sizable position in Mondelez at the end of 2015, having indicated ownership of 43.4 million shares in its latest 13F filing.
#1 General Electric Company (NYSE:GE)
Shares Owned by Trian Partners (as of December 31): 77.8 million
Value of Holding (as of December 31): $2.42 billion
In the beginning of the year, General Electric Company (NYSE:GE) shares fell by as much as 11% before gaining back all of the lost ground and breaking into green territory, ending the first quarter up by 2.9%. The company recently completed another big step in its bid to completely exit the banking business, having sold another $16 billion worth of assets to Goldman Sachs Group Inc (NYSE:GS). Last year, GE managed to offload $157 billion in financial assets as it looks to rid itself of the Systemically Important Financial Institution label. Market participants expect a large portion of the funds to be returned to investors, with Morgan Stanley analysts expecting an increase in GE’s share buyback program and a modest increase to its capital dividends. GE’s renewables division had a particularly strong first quarter, with orders jumping by 110% to $2 billion, partly aided by the company’s acquisition of Alstrom which was completed in November.
Nonetheless, General Electric Company (NYSE:GE) fell out of favor with hedge fund managers in our database during the fourth quarter, as the number of them long the stock dropped to 54 from 74. Mr. Peltz dumped 15% of his stake in GE over the fourth quarter, while Ken Fisher‘s Fisher Asset Management reported a 2% increase to its holding, lifting it to 31.2 million shares.