Is Index Investing Turning Into A Bubble? This Billion Dollar Hedge Fund Thinks So (And Has The Data To Prove It)

 Wendys Co (NASDAQ:WEN)

– Shares Held By Horizon Kinetics (as of September 30): 12.28 Million

– Value of Holding (as of September 30): $132.69 Million

Wendys Co (NASDAQ:WEN) was another stock in which Horizon Kinetics reduced its stake by 5% during the third quarter. The firm first bought shares of Wendys Co (NASDAQ:WEN) in 2012 when they were trading at $6. Since then the stock has more than doubled and is up by 2.63% so far this year. Horizon Kinetics attributes a large part of those gains to the long-term transformation plan put forward by activist investors Nelson Peltz and Peter May in 2011-2012. However, the firm still considers the transformation “a work in progress” as the company has only upgraded 28% of its restaurants in North America versus a target of 60% by 2020.

In its market commentary, Horizon Kinetics argues that the substantial expenditure the company has spent on the remodeling of its stores masks the profitability improvement in the stores that have already been remodeled. Moreover, the firm thinks that these expenditures will decline sharply going forward, resulting in the free cash flow of the company rising substantially. Anticipating this increase in cash flow, Wendys has purchased 30% of its float in the past 18 months under its buyback program, which Horizon thinks “will be accretive on a per share basis in the future.”

wavebreakmedia/Shutterstock.com

wavebreakmedia/Shutterstock.com

Follow Wendy's Co (NASDAQ:WEN)