Top Positions For Billionaire Nelson Peltz

Includes: FDO, IR, LAZ, LM, WEN
by: Insider Monkey

We have compiled over four hundred 13F filings for the fourth quarter of 2012 and have been analyzing them to determine where hedge funds found value, unwound positions, or reiterated their views on existing holdings. Our research has led us to discover a small-cap strategy that has returned over 29% since its inception in September of last year (find more information about it here). One of those filings that we've taken interest in is that of billionaire Nelson Peltz, a value and activist investor who heads Trian Partners. He has a very concentrated portfolio with heavy holdings (his top five positions comprise nearly 90% of his assets). We have analyzed them below.

Ingersoll-Rand Plc (NYSE:IR) became Trian's top investment this past quarter, unseating a previous SPY put position. The international concern works to enhance the comfort of air in homes, transport perishable foods, and increase industrial productivity. IR has been on an upswing, netting investors who bought this time last year a gain of 37%. Despite beating earnings every quarter last year, not all analysts recommend the stock strongly, with most balancing around Buy and Hold. Wells Fargo recently downgraded the stock to Market Perform from Outperform, while ISI Group pushed its rating up to a Buy. Peltz joins Ralph Whitworth of Relational Investors in IR. Whitworth recently announced a 3.8% stake in the company.

Family Dollar Stores, Inc. (NYSE:FDO) is another large holding of Trian's, amounting to over 24% of the fund's $2.4bn in assets. The stock gave a relatively flat performance stretching back twelve months but still has 9% of upside according to analysts' average price target a year out. FDO has joined other low-cost retailers like Dollar Tree (NASDAQ:DLTR) and Dollar General (NYSE:DG) by becoming more in vogue with institutional investors as of late, although Wall Street sees more aggressive pricing and increased advertising from Wal-Mart as a potential threat to their customer base. Billionaire Jim Simons of Renaissance Technologies dropped his share count in half in the last quarter of 2012 (check out his other picks here).

The Wendy's Company (NYSE:WEN) made it into the top three of Trian's portfolio with an investment of nearly $400mm. Peltz kept his 80mm shares of the fast food giant unchanged from Q3 2012 to Q4, but the stock's appreciation in that quarter bumped up his position's market value by almost 4%. Wendy's has been met with a number of downgrades since this start of the year, with firms like Morgan Stanley, Credit Suisse and Standpoint Research taking a more pessimistic view on the company. Morgan Stanley points to macroeconomic factors and increased competition as near-term troubles for the restaurant operator. Billionaire Israel Englander of Millennium Management cut his position by 50% in Q4 2012.

Legg Mason, Inc. (NYSE:LM) has a $330mm commitment from Trian Partners and occupies the fourth largest position in the fund's portfolio. Around five percent of the funds we track hold the global asset manager, although Peltz stands as the second-largest stakeholder of LM. Peltz also sits on the board of directors for Legg Mason and recently lent his approval towards the appointment of Joe Sullivan as permanent CEO last month, although investors brought the stock down after the announcement. Billionaire Mario Gabelli of GAMCO Investors holds 3.6mm shares of the company.

Lazard Ltd. (NYSE:LAZ) slides into Trian's top five as well with an allocation of nearly $170mm. The financial advisory and asset management company is slightly larger than Legg Mason in terms of market cap and edges out LM in terms of dividend yield as well. LAZ provides a yield of 2.2% versus LM's 1.6%. Both Buckingham Research and JPM Securities have upgraded the stock since the start of this year, with Buckingham's coming after Lazard's significant earnings beat of 27 cents on the seventh of last month. Billionaire Ken Fisher of Fisher Asset Management has an investment of $44mm in LAZ.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Business relationship disclosure: This article is written by Insider Monkey's writer, Eric Winter, and edited by Meena Krishnamsetty. They don't have any business relationships with any of the companies mentioned in this article and they didn't receive compensation (other than from Insider Monkey and Seeking Alpha) to write this article.