Long Term Returns of Nelson Peltz’s 5 Activist Targets

In this article, we discuss long-term returns of Nelson Peltz’s 5 activist targets. If you want to see more stocks in this selection, check out Long Term Returns of Nelson Peltz’s Activist Targets.

5. Ingersoll Rand Inc. (NYSE:IR) 

Activist Investment: 2012
Long Term Returns Since Peltz’s Investment: 78.13%
S&P 500 Gain Since Peltz’s Investment: 60.75%

Ingersoll Rand Inc. (NYSE:IR) is a company that provides mission-critical air fluid energy and medical technologies. Peltz took a 7.05% stake in the manufacturing conglomerate in 2012 worth $900 million.

The investment ranked Peltz as one of the largest shareholders, coming at a time when the company’s share price had tanked by nearly 50% from 2007 highs. The activist investor argued that the company was highly undervalued. He started pushing for strategic changes, including a bid to split Ingersoll Rand Inc. (NYSE:IR) into two or more separate publicly traded companies.

In August 2012, the activist investor joined the company’s board, which averted a potential proxy fight. By year-end, the company had agreed to spin off its security business, which included brands Schlage and Kryptonite, into a new company called Allegion. Peltz approved the spinoff, insisting it would create significant shareholder value. The spinoff was completed in 2013, and Peltz left the board in 2016, satisfied with the progress.

4. Family Dollar Stores, Inc. (NYSE:FDO) 

Activist Investment: 2010
Long Term Returns Since Peltz’s Investment: 124%
S&P 500 Gain Since Peltz’s Investment: 61.4%

Family Dollar Stores, Inc. (NYSE:FDO) is a US-based chain of over 8,000 discount stores that offer brand-name products at low prices. Peltz and Trian Partners initiated a position in the company in 2010 and grew their stakes to 7.34% of the common stock after that. The activist investor declared the company’s share undervalued and discussed possible moves to raise share prices with management.

The strategies discussed include raising sales per square foot and increasing the stock buyback plan. In 2011, Peltz investment firm offered to buy the retailer for at least $7 billion in a deal valued at between $55 and $60 a share, representing a 25% premium.

The deal never materialized as Dollar Tree acquired Family Dollar Stores, Inc. (NYSE:FDO) for cash and stock in a bid worth $8.5 billion. The deal marked a massive victory for activist investor Peltz, who received $1.2 billion for his stakes. Carl Icahn, who had amassed a 9.6% stake, was also a big winner.

3. Legg Mason, Inc. (NYSE:LM)

Activist Investment: 2009
Long Term Returns Since Peltz’s Investment: 66%
S&P 500 Gain Since Peltz’s Investment: 125%

Legg Mason, Inc. (NYSE:LM) is an investment and asset management firm specializing in investment management and related services. Peltz joined the company’s board in 2009 after accumulating a 4.3% stake.

With his appointment, the asset management avoided a proxy fight with activist investors agreeing to vote in favor of the company’s board nominees over the next two years and not initiate any fight. However, with Peltz on the board, speculation was rife that he would engineer a push to take the asset managers private. 

Peltz would sell all his company positions and leave the board in 2014. The sale came after the company’s restructuring program. The firm needed help focusing on active money management as low-cost passive investing became the norm in the financial industry.

Nevertheless, Legg Mason, Inc. (NYSE:LM) received a boost in 2019 after it emerged that Peltz’s Trian hedge fund was contemplating a fight to turn around its fortunes. The asset management firm was struggling then, with reports indicating Peltz was planning to push for cost cuts and improve margins.

2. The Kraft Heinz Company (NASDAQ:KHC)

Activist Investment: 2007
Long Term Returns Since Peltz’s Investment: 16%
S&P 500 Gain: -7.1%

The Kraft Heinz Company (NASDAQ:KHC) is a company that manufactures and markets food and beverages worldwide.

Activist Investor Nelson Peltz first acquired a 3% stake in the company in 2007 and started a campaign to jettison unsuccessful brands and find use for the company’s cash. The activist investor wanted the company to sell Post cereal and Maxwell House coffee brands. There were also calls to cut costs, raise dividends, and increase share buybacks.

Peltz fought and won two seats on the board, forcing the company to cut its overall spending and focus on marketing directly to consumers. By 2011, Peltz had halved his stakes in The Kraft Heinz Company (NASDAQ:KHC) to about 1.05 million shares. Peltz would later repurchase 12.2 million shares the same year.

1. Tiffany & Co. (NYSE:TIF)  

Activist Investment: 2007
Long Term Returns Since Peltz’s Investment: 66.67%
S&P 500 Gain Since Peltz’s Investment: 48.49%

Tiffany & Co. (NYSE:TIF) is an American jewelry and specialty design company. Peltz first disclosed a 5.5% stake in the jewelry chain in 2007 after the stock had rallied by more than 60%.

Despite the massive rally, Trian Partners insisted that the company’s stock was highly undervalued. The hedge fund’s primary goal was to help the company improve its margins and earnings per share growth.

The activist investor also planned to address operational and strategic issues, including global expansion opportunities and evaluating non-core business. However, the activist investor never sought any seat on the board and did not wage any proxy battle.

Trian Partners exited its holdings in Tiffany & Co. (NYSE:TIF) in the second quarter of 2016.

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