Tracking Nelson Peltz's Trian Fund Management Portfolio - Q4 2015 Update

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Includes: ALLE, BK, CC, DD, DOW, GE, IR, LM, MDLZ, PEP, PNR, SYY, TIF, WEN
by: John Vincent

Summary

Nelson Peltz's 13F portfolio increased from $11.72B to $12.33B this quarter. The number of positions decreased from 12 to 10.

Trian Fund Management dropped Chemours & Ingersoll-Rand while decreasing Du Pont and General Electric.

The top three positions are General Electric, Mondelez International, and PepsiCo and they add up to ~52% of the portfolio.

This article is part of a series that provides an ongoing analysis of the changes made to Nelson Peltz's US stock portfolio on a quarterly basis. It is based on Peltz's regulatory 13F Form filed on 02/16/2016. Please visit our Tracking Nelson Peltz's Trian Fund Management Portfolio article for an idea on his investment philosophy and our last update for the fund's moves during Q3 2015.

This quarter, Peltz's US long portfolio increased 5.24% from $11.72B to $12.33B. The number of holdings decreased from 12 to 10: Chemours and Ingersoll-Rand were dropped. The top three holdings are at 51.96% of the US long portfolio: General Electric, Mondelez International, and PepsiCo Inc.

To know more about activist investing, check out Deep Value: Why Activist Investors and Other Contrarians Battle for Control of Losing Corporations.

Stake Disposals:

Chemours Co. (NYSE:CC): CC was a very small 0.27% of the portfolio stake established last quarter as a result of its spinoff from Du Pont E l De Nemours that closed in July 2015. Du Pont shareholders received one share of CC for every 5 shares of Du Pont held. This quarter, the position was eliminated at prices between $4.72 and $8.48. The stock currently trades at $4.13 and is down ~80% since the spinoff.

Ingersoll-Rand PLC (NYSE:IR): IR was a small 1.23% of the US long portfolio stake established in May 2012 in the low-40s price-range. In Q1 2015, the stake was reduced by one-third at prices between $60.86 and $68.81 and the following quarter saw a further ~15% reduction at prices between $65.83 and $70.91. There was another ~60% reduction last quarter at prices between $50.61 and $68.76 and the elimination this quarter was at prices between $50.69 and $60.21. The stock currently trades at $52.02.

Note: Nelson Peltz was elected to the company's board in 2012. He pushed for changes to improve shareholder value that ultimately saw the Allegion (NYSE:ALLE) spin-off in November 2013. Trian's resultant Allegion stake was eliminated in Q2 2015.

New Stakes:

None.

Stake Decreases:

Du Pont E l De Nemours (NYSE:DD): DD is a large 10.92% of the US long portfolio stake. It was first purchased in Q4 2013. The bulk of the current position was acquired in Q4 2014 at prices between $70.89 and $80.50. This quarter saw a ~22% reduction at prices between $48.35 and $74.55. The stock currently trades at $59.97.

Note 1: In May 2015, Trian lost a proxy battle: they nominated 4 members to the 12-member board but lost the shareholders vote. In December 2015, Dow Chemical (NYSE:DOW) and DuPont announced a merger of equals with plans to separate into three businesses after the merger.

Note 2: The cost-basis implied by the prices quoted is negatively skewed because of the spinoff of Chemours that closed in July 2015.

General Electric (NYSE:GE): GE is currently Trian's largest position at 19.65% of the 13F portfolio. The position was established in Q2 2015 at prices between $24.81 and $28.51 and increased by ~83% last quarter at prices between $23.27 and $27.24. This quarter saw a ~14% trimming at prices between $25.19 and $31.28. The stock currently trades at $29.01.

Note: The GE stake was first disclosed in a 13F amendment filed on 10/5/2015. Trian avoided disclosing this stake in Q2 2015 by making use of the "section 13(f) Confidential Treatment Requests".

Stake Increases:

Bank of New York Mellon (NYSE:BK): The original BK stake was built-up during the first three quarters of 2014 at prices between $31.35 and $39.90. Q1 2015 saw a ~5% increase at prices between $35.66 and $41.14. The last two quarters have seen minor further increases. The stock currently trades at $34.92.

Note 1: Per a 02/19/2016 Form 4 filing, Trian has increased the position from 30.93M shares to 31.82M shares. The increase was at ~$31.50 per share.

Note 2: In December 2014, Trian was offered a seat in BK's board. The company also unveiled a cost-saving plan aimed at cutting $500M in expenses through 2017. In March 2015, Marcato Asset Management requested Trian's support in their efforts to replace BNY Mellon's CEO but Trian rejected the plan.

Pentair plc (NYSE:PNR): PNR is a fairly large 5.50% of the 13F portfolio stake established in Q2 2015 at prices between $60.51 and $68.75 and increased by ~92% last quarter at prices between $50.46 and $68.75. The stock currently trades near the low end of his purchase price ranges at $48.01. This quarter saw a ~5% increase.

Note 1: Per a 2/19/2016 Form 4 filing, the PNR stake was increased from 13.68M shares to 14.34M shares. The increase was at ~$48 per share.

Note 2: In mid-2015, Trian indicated to management that they would like the company to make acquisitions to consolidate the fragmented market for pumps and valves. Partly in response, PNR agreed to acquire Erico Global for $1.8B in cash.

Sysco Corporation (NYSE:SYY): SYY is a top-five 14.19% of the portfolio position purchased in Q2 2015 at prices between $35.97 and $38.75 and increased by ~300% last quarter at prices between $35.68 and $41.38. The stock currently trades at $44.99. This quarter saw a marginal further increase.

Note: On August 20, 2015 Sysco appointed Nelson Peltz and Josh Frank (a partner at Trian) to the company's Board.

Kept Steady:

Legg Mason Inc. (NYSE:LM): LM is a very long-term stake established in 2009 in the low-20s price-range. Around 7M shares were purchased at the time and the position was since doubled. Q2 2015 saw a ~14% trimming at prices between $50.45 and $55.58. The stock is currently at $27.42.

Note: Nelson Peltz was elected to the board in November 2009 and in February 2013, the CEO was replaced.

Mondelez International (NASDAQ:MDLZ): MDLZ is Trian's second-largest position at 17.47% of the US long portfolio. The original stake is from Q4 2012 when over 19M shares were purchased in the mid-20s price-range. The following quarter saw a stake-doubling in the low-30s price-range. The current position is at just over 48M shares. Q4 2014 saw a ~10% increase at prices between $32.10 and $39.20 and the following quarter saw a further ~4% increase at prices between $34.34 and $37.59. The stock currently trades well outside those ranges at $39.81.

Note: Following their stake establishment in 2012, Trian pushed Mondelez for a merger with PepsiCo but that did not pan out. In early 2014, Peltz acquired a board-seat in a compromise agreement with Mondelez.

PepsiCo Inc. (NYSE:PEP): PEP is Trian's third-largest position at 14.84% of the US long portfolio. The original stake is from Q4 2012 when ~3.9M shares were purchased in the high-60s price-range. The following quarter saw a stake-tripling in the mid-70s price-range. The position was kept relatively steady till Q3 2014 when the stake was increased by ~38% in the low-90s price-range. The stock currently trades at $99.58.

Note: Peltz pushed for a break-up of PepsiCo into beverage and snack businesses but that campaign failed. In January 2015, it was announced that Trian's William R. Johnson (former CEO at Heinz) will be added to PepsiCo's board.

Tiffany & Company (NYSE:TIF): TIF is a minutely small 0.01% of the US long portfolio position. It is a remnant stake from an activist position established in 2007 & 2008 in the high-30s price range. The position was sold down starting in 2011 when the stock reached the low-80s and by 2013 the stake was almost completely eliminated.

Wendy's Company (NASDAQ:WEN): The WEN stake goes back to 2005 when Trian Fund Management was founded. The position has fluctuated over the years. Q1 2014 saw a ~22% stake reduction at prices between $8.44 and $9.90. Q2 2015 also saw a ~17% reduction as Trian sold shares back to Wendy's as part of their $1.4B buyback program. Last quarter saw a further ~17% selling at prices between $8.56 and $11.28. The stock currently trades at $9.31. The remaining position is still very significant at 3.56% of the US long portfolio (~14.92% of the business).

Note: About a decade ago, Peltz laid out plans to improve operations and suggested that the 10% margins at the company-owned stores were well below par. In 2008, Triarc Companies (controlled by Peltz) agreed to combine Arby's with Wendy's with a goal of improving company store margins over time. In July 2013, Wendy's announced plans to refranchise company owned restaurants. The target is for 5% company ownership across its system of ~6500 shops.

The spreadsheet below highlights changes to Peltz's US stock holdings in Q4 2015:

Click to enlarge

Disclosure: I am/we are long DOW.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.