Tracking Nelson Peltz's Trian Fund Management Portfolio - Q2 2015 Update

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Includes: ALLE, BK, DD, DLTR, FDO, IR, LM, MDLZ, PEP, PNR, SYY, TIF, WEN
by: John Vincent
Summary

Nelson Peltz's 13F portfolio increased from $8.56B to $9.03B. The number of positions increased from 10 to 11.

Trian Fund Management added large new positions in Pentair plc and Sysco Corporation.

The top-three positions are Mondelez International, PepsiCo, and Du Pont E l De Nemours and they add up to just over 58% 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 08/14/2015. Please visit our Tracking Nelson Peltz's Trian Fund Management Portfolio article for an idea on his investment philosophy and the fund's moves during Q1 2015.

This quarter, Peltz's US long portfolio increased 5.51% from $8.56B to $9.03B. The number of holdings increased from 10 to 11: a small position in Allegion plc was eliminated while adding large stakes in Pentair plc and Sysco Corporation. The top three holdings are at 58.20% of the US long portfolio: Mondelez International (21.88%), PepsiCo Inc. (18.93%), and Du Pont E l De Nemours (17.39%).

Stake Disposals:

Allegion plc (NYSE:ALLE): ALLE stake was established in December 2013 as a result of the spinoff of Allegion from Ingersoll-Rand. Peltz owned around 12M shares of IR at the time and the terms called for 1 share of ALLE for every 3 shares held. The following two quarters saw the stake reduced by around 60% at prices between $44 and $58. This quarter, the remaining very small ~1% portfolio stake was sold at prices between $59.10 and $63.18. The stock currently trades at $60.38.

New Stakes:

Pentair plc (NYSE:PNR): PNR is a fairly large 5.17% of the 13F portfolio stake established this quarter at prices between $60.51 and $68.75. The stock currently trades below that range at $57.03.

Note: A July 29, 2015 regulatory 13D/A filing showed Peltz owning ~13M shares (7.22% of the business): he doubled the stake after the quarter ended. It is an activist position and Trian is already in touch with management: they would like the company to make acquisitions to lead an effort to consolidate the fragmented market for pumps and valves.

Sysco Corporation (NYSE:SYY): SYY is a 4.08% of the portfolio position purchased this quarter at prices between $35.97 and $38.75. The stock currently trades at $39.70.

Note: An August 4th, 2015 13D filing showed Peltz owning ~42M shares (7.08% of the business). The purchases happened at prices between ~$35.50 and ~$38.50. On August 20, 2015 Sysco appointed Nelson Peltz and Josh Frank (a partner at Trian) to the company's Board.

Stake Decreases:

Ingersoll-Rand PLC (NYSE:IR): IR is a 5.44% of the US long portfolio stake established in May 2012 in the low-40s price-range. Last quarter, the stake was reduced by one-third at prices between $60.86 and $68.81 and this quarter saw a further ~15% reduction at prices between $65.83 and $70.91. The stock currently trades at $57.78.

Note: Nelson Peltz was elected to the company's board in 2012. He pushed for changes to improve shareholder value that ultimately resulted in the Allegion spin-off in November 2013.

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. This quarter saw a ~14% trimming at prices between $50.45 and $55.58. The stock is currently at $46.09. Peltz is starting to harvest long-term gains from this position.

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

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. This quarter also saw a ~17% reduction as Trian sold shares back to Wendy's as part of their $1.4B buyback program. The stock currently trades at $9.16. The remaining position is still very significant at 6.75% of the US long portfolio (~18.6% of the business).

Note: Almost 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.

Stake Increases:

Mondelez International (NASDAQ:MDLZ): MDLZ is Trian's largest position at 21.88% 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 stake is at just over 48M shares. Q4 2014 saw a ~10% stake increase at prices between $32.10 and $39.20 and last quarter saw a further ~4% increase at prices between $34.34 and $37.59. The stock currently trades at $43.20. This quarter saw very marginal further buying.

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.

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. This quarter saw a minor increase.

Kept Steady:

Bank of New York Mellon (NYSE:BK): BK is a ~2.7% of the business stake built-up during the first three quarters of 2014 at prices between $31.35 and $39.90. Last quarter saw a ~5% increase at prices between $35.66 and $41.14. The stock currently trades at $41.45.

Note: 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.

Du Pont E l De Nemours (NYSE:DD): DD is Trian's third-largest position at 17.39% of the US long portfolio. 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. The stock currently trades well below that range at $52.

Note: Trian lost a proxy battle on May 13th: they nominated 4 members to the 12-member board but lost the shareholders vote.

Family Dollar Stores (NYSE:FDO): FDO was a 7.03% of the US long portfolio position as of Q4 2014. It was first purchased in July 2010 in the mid-30s price-range. The stake had remained steady at 8.37M shares ever since. Last quarter, the position was almost eliminated at prices between $75.14 and $79.91.

Note 1: In January, shareholders approved Dollar Tree's (NASDAQ:DLTR) offer to acquire FDO for $77.05 per share and that transaction closed last month.

Note 2: In 2010, Peltz offered to buy the company in the $55 to $60 price-range in a hostile bid. He later dropped that bid as the company offered a board seat.

PepsiCo Inc. (NASDAQ:PEP): PEP is Trian's second-largest position at 18.93% 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 $96.33.

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.

The spreadsheet below highlights changes to Peltz's US stock holdings in Q2 2015:

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