Should You Follow Billionaire Nelson Peltz Into Bank of New York Mellon Corp (BK)?

Nelson Peltz’s Trian Fund Management continues to raise its exposure to Bank of New York Mellon Corp (NYSE:BK), purchasing another 273,000 shares at a price of $36.63 per share in a transaction dated January 28, according to a filing with the SEC. The latest move gives Trian 29.17 million shares, approximately 2.6% of all common shares, and is classified as an insider purchase due to the presence of Trian co-founder Edward Garden on the bank’s board, where he is a director. Garden was appointed to that post on December 1.

Trian Fund Management is an activist-focused fund founded in 2005 by Peltz, Garden, and Peter May. With just 11 holdings in their equity portfolio as of September 30, the fund has a focus on taking up strong positions in each company it invests in, and working with the company’s board to improve their operations with a focus on improving shareholder value. We analyzed the performance of Trian’s stock positions that are disclosed in 13F filings. Between 2006 and 2012 imitating Trian’s 13F portfolio would have returned an average of 72 basis points per month. S&P 500 Index returned an average of 45 basis points per month during the same period. Vanguard’s index funds are extremely popular among investors because most investors think that it isn’t possible to beat the market on average. This observation is valid for a large number of active fund managers but there are some exceptions like Warren Buffett and Nelson Peltz. Peltz mostly invests in larger cap stocks and manages to beat the market by unlocking value through corporate activism. That’s why we pay attention to his stock moves.

Trian was most recently involved in spurring Family Dollar Stores, Inc. (NYSE:FDO) (on the board of which, Garden was also a director) to merge with Dollar Tree, Inc. (NASDAQ:DLTR). After being a part of the successful shareholder vote to approve the merger on January 22, Trian sold most of their position a few days later.

In terms of their activist investing endeavors, Trian Fund Management may be in for its biggest fight yet as it prepares to take on the board of E I Du Pont De Nemours And Co (NYSE:DD) in an effort to replace four directors on that board. Their move is seen as bold and perhaps even brazen given DuPont’s general outperformance of the market over the past few years and a stock that is up 20% over the past year.