Mondelez International Inc (MDLZ), State Street Corporation (STT): Billionaire Nelson Peltz Is Making Moves

Train’s top two holdings include Ingersoll-Rand PLC (NYSE:IR) and Family Dollar Stores, Inc. (NYSE:FDO). Ingersoll-Rand is its top holding and makes up 27.3% of its portfolio, and Family Dollar is second, making up 24% of the portfolio. Ingersoll-Rand provides security and safety, climate control and industrial productivity products. Recent news has Ingersoll-Rand spinning off its residential and commercial security business to shareholders, which is key for helping the company improve its business operations.

A rebound in residential housing activity in the U.S., will help Ingersoll’s residential segment, which will also be positive for its commercial construction exposure. I think this turnaround stock is worth considering, where over the last ten years the company has grew EPS at an average annualized rate of 11.8%, while growing dividends at 6.5%. As well, return on invested capital was 12.7% in 2012, an impressive improvement from 2011’s 6.0%.

Train’s other top holding, Family Dollar Stores, Inc. (NYSE:FDO), saw higher sales last quarter, but a price war among the dollar stores has put pressure on margins. Even still, gross margins remained above average at 34% last quarter. Another key point is the company’s somewhat diverse revenue streams; 69% of revenues from consumables, 11% from home products (housewares and home decor), 9% from apparel (clothing) and 11% from electronics (toys and pre-paid cellular phones).

Despite a potentially strengthening economy, I think Family Dollar has positioned itself nicely to remain a part of the consumers everyday shopping. Management projects second quarter comp sales growth in the range of 4% to 5% and fiscal 2013 comparable-store sales to increase between 4% and 6%, both very good signs of continued growth (see why dollar stores are still a growth story).

Don’t be fooled

Billionaire Nelson Peltz runs a very niche hedge fund with over 50% of its fund invested in its top two holdings, both of which should perform well over the interim. As well, his fund sold off the majority of its State Street Corporation (NYSE:STT) position, which I agree with, but also sold off Mondelez International Inc (NASDAQ:MDLZ), which I disagree. Peltz’s other big move was adding MeadWestvaco, a relatively unknown company that is a good bet on a rebounding economy.

The article Billionaire Nelson Peltz Is Making Moves originally appeared on Fool.com and is written by Marshall Hargrave.

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