Billionaire Nelson Peltz Bets Big on Industrial, Consumer Staples

Since being established in November 2005, the activist fund Trian Partners has worked with the management teams of a number of under-performing companies including The Wendy’s Company, H. J. Heinz Company, Legg Mason, State Street Corporation, and Kraft Foods to enhance shareholder value through a combination of strategic re-direction, improved operational execution, and more efficient capital allocation. In order to gauge where billionaire Nelson Peltz‘s fund believes the next growth story lies, we are going to delve a little deeper into Trian’s top picks, according to its latest 13F filing.

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#5 Bank of New York Mellon Corp (NYSE:BK)

– Shares Owned by Trian Partners (as of March 31): 31.83 Million

– Value of Holding (as of March 31): $1.17 Billion

During the first quarter, Trian inched up its Bank of New York Mellon Corp (NYSE:BK) stake by 2%. Legendary investor Warren Buffett‘s Berkshire Hathaway was also bullish on the investment company during the same period and hiked its holding by 4% to 20.83 million shares. The bank’s shares have slipped by more than 3.3% since the start of this year, even though it beat both top and bottom line estimates in its first quarter financial results by delivering an EPS of $0.74, which was $0.06 higher than expectations and revenues of $3.74 billion were $10 million above the consensus estimate. The operating margin also improved to 31% despite tough market conditions.

#4 E I Du Pont De Nemours And Co (NYSE:DD)

– Shares Owned by Trian Partners (as of March 31): 20.49 Million

– Value of Holding (as of March 31): $1.30 Billion

Next in line is Trian’s bet from the industrials sector, E I Du Pont De Nemours And Co (NYSE:DD) which represented 12.49% of its equity portfolio and was hiked by 1% during the first three months of this year. E I Du Pont De Nemours And Co (NYSE:DD)’s stock price has slipped by 3.1% on year-to-date basis. The analysts seem to have a mixed opinion about the company. While Credit Agricole recently downgraded the stock to ‘Underperform’ from ‘Outperform’ RBC Capital Markets, on the other hand, reiterated its ‘Sector Perform’ rating on the company and raised its price target to $71 from $62. The company recently raised its EPS guidance for the fiscal year 2016 to $3.05-$3.20 up from prior guidance of $2.95-$3.10. Mason Hawkins‘ Southeastern Asset Management held about 6.64 million shares of E I Du Pont De Nemours And Co (NYSE:DD) valued at $420.34 million at the end of March.

#3 Mondelez International Inc (NASDAQ:MDLZ)

– Shares Owned by Trian Partners (as of March 31): 48.03 Million

– Value of Holding (as of March 31): $1.93 Billion

Trian initiated a stake in Mondelez International Inc (NASDAQ:MDLZ) during the first quarter of 2011. The position was unchanged during the first three months of 2016 and although down by about 3.5% so far this year, Mondelez’s shares are up by almost 7% in the last 12 months. Another activist investor Bill Ackman of Pershing Square that held 22.94 Million shares of Mondelez at the end of March believes that the company’s 2018 target margins of 17% to 18% will significantly increase the company’s value going forward, as he said in a recent investor letter.

#2 SYSCO Corporation (NYSE:SYY)

– Shares Owned by Trian Partners (as of March 31): 43.27 Million

– Value of Holding (as of March 31): $2.02 Billion

After Trian inched up its SYSCO stake by 1% in the March quarter the holding amassed about 7.66% of the North American distributor of food and related products’ outstanding shares. SYSCO Corporation (NYSE:SYY)’s shares have rallied by a hefty 20.2% so far this year. The rise was perhaps also the reason that motivated Donald Yacktman‘s Yacktman Asset Management to remove some profits off the table as it cut its SYSCO holding by 16% to 17.36 million shares during the first quarter.  During the third fiscal quarter, ended March 26, SYSCO Corporation (NYSE:SYY) managed to expand its gross margins for the fourth consecutive quarter to 17.8%. Margins were declining for nine straight quarters before the recent improvement.

#1 General Electric Company (NYSE:GE)

– Shares Owned by Trian Partners (as of March 31): 74.25 Million

– Value of Holding (as of March 31): $2.36 Billion

Trian trimmed its General Electric Company (NYSE:GE) holding by 4%. The stake represents 22.73% of the fund’s portfolio and is a major chunk of the 30% amassed by the industrials sector in Trian’s 13F. As part of the company’s strategy to reinvent itself by moving away from the financial services industry and delving deeper into the industrials sector, General Electric recently announced a $250 million purchase of Heat Recovery Steam Generator (HRSG) business from Korean giant Doosan Engineering & Construction (DEC). Another fund bullish on General Electric Company (NYSE:GE) is Harris Associates as it holds more than 45.83 million shares of the company.

Disclosure: None