Tracking Nelson Peltz's Trian Fund Management Portfolio - Q4 2018 Update

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Includes: BK, F, GE, MDLZ, NVT, PG, PNR, PPG, SYY, WEN
by: John Vincent
Summary

Nelson Peltz's 13F portfolio value decreased from $10.34B to $9.24B this quarter. The number of positions remained steady at 9.

Trian Fund Management reduced Pentair plc and Sysco while increasing PPG Industries during the quarter.

The top three positions are Procter & Gamble, Sysco Corporation, and Bank of New York Mellon and they add up to about two-thirds of the portfolio.

This article is part of a series that provides an ongoing analysis of the changes made to Nelson Peltz’s 13F portfolio on a quarterly basis. It is based on Peltz’s regulatory 13F Form filed on 02/14/2019. 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 2018.

This quarter, Peltz’s 13F portfolio value decreased ~11% from $10.34B to $9.24B. The number of holdings remained steady at 9. The top three holdings are at ~65% of the 13F stock portfolio: Procter & Gamble (NYSE:PG), Sysco Corporation (NYSE:SYY), and Bank of New York Mellon (NYSE:BK). To know more about activist investing, check out Deep Value: Why Activist Investors and Other Contrarians Battle for Control of Losing Corporations.

New Stakes:

None.

Stake Increases:

PPG Industries (PPG): PPG is a 7.76% portfolio stake established in Q2 2018 at prices between $100 and $113 and increased by ~60% last quarter at prices between $102 and $116. There was another ~70% increase this quarter at prices between $95 and $111. The stock currently trades at ~$112. For investors attempting to follow, PPG is a good option to consider for further research.

Note 1: In October, Trian pursued replacing Chief Executive Michael McGarry with former CEO Chuck Bunch. Last month, Trian abandoned the idea in response to the company announcing plans to address some of Trian’s issues: explore splitting into two businesses, de-stagger board elections, and removing super majority voting.

Note 2: The PPG stake was first disclosed in a 13F amendment filed on 10/9/2018. Trian avoided disclosing this stake in Q2 2018 by making use of the “section 13(F) Confidential Treatment Requests.”

Procter & Gamble: PG stake was established in Q4 2016 at prices between $82 and $90. Q1 2017 saw a huge ~5x stake increase at prices between $83.50 and $92. The stock currently trades at ~$99. It is now their largest position at ~38% of the portfolio. There was a marginal increase this quarter.

Note 1: Regulatory filings since the quarter ended show them owning 36.7M shares of P&G. This is compared to 37.9M shares in the 13F report. Around 1.2M shares were disposed at ~$99 per share.

Note 2: In July 2017, Trian launched a proxy fight for a board seat at P&G and termed P&G’s business culture a “suffocating bureaucracy.” A whitepaper soon followed proposing a reorganization under a “lean holding company” structure: a) beauty, grooming and healthcare, b) fabric and home care, and c) baby, feminine and family care. Trian narrowly lost the proxy battle but P&G still appointed Peltz to the company’s board. In June last year, Peltz indicated his reorganization plan is “under very serious consideration” by the company’s board.

Bank of New York Mellon: The original BK stake was built up during the first three quarters of 2014 at prices between $31 and $40. There was a ~31% selling in Q3 2017 at ~$53 and that was followed with a similar reduction in the following quarter at prices between $51 and $55. The stock currently trades at $52.75 and the stake is at ~8% of the portfolio. There were marginal increases in the last three quarters.

Note 1: Regulatory filings since the quarter ended show them owning ~14M shares of Bank of New York Mellon. This is compared to ~16.1M shares in the 13F report. Around 2.1M shares were sold at ~$53.50 per share.

Note 2: In 2014, Trian’s co-founder Edward Garden was added to BK’s board. The company also unveiled a cost-saving plan to reduce $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. In Q4 2016, Marcato exited their position.

Mondelez International (MDLZ): MDLZ is a ~8% of the 13F portfolio position. The original stake was 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. There was a ~55% selling in Q1 2018 at prices between $40.50 and $46. The stock currently trades at $47.13. The last three quarters have seen marginal increases.

Note: Following their stake establishment in 2012, Trian pushed Mondelez for a merger with PepsiCo (NASDAQ:PEP) but that did not pan out. In early 2014, Peltz acquired a board seat in a compromise agreement with Mondelez. In March 2018, Nelson Peltz left the board and was replaced by Trian’s president Peter May.

General Electric (GE): The GE position is currently at ~6% of the 13F portfolio. The stake was established in Q2 2015 and increased by ~83% the following quarter at an overall cost basis in the low-20s. Q4 2015 saw a ~14% trimming at prices between $25 and $31.50. The stock currently trades well below their purchase price ranges at $10.88. There was a ~7% trimming in Q4 2016 at prices between $28 and $32.50. For investors attempting to follow Trian, GE is a good option to consider for further research. There were marginal increases in the last three quarters.

Note: In October 2017, Trian won a board seat at General Electric. Soon after, long-time (16 years) CEO Jeff Immelt stepped down. John Flannery, the head of GE’s healthcare unit was named as the new CEO. In October, Larry Culp (formerly CEO at Danaher) was named the CEO.

Stake Decreases:

Sysco Corporation: SYY is the second largest position at ~19% of the portfolio. It was purchased in Q2 2015 at prices between $36 and $39 and increased by ~300% the following quarter at prices between $35.50 and $41.50. The stock currently trades at $67.11. There was a ~5% selling in Q2 2018 at ~$66 per share and another ~12% reduction last quarter at ~$75. The position was further reduced by ~25% this quarter at ~$66.30. Trian still controls 5.45% of the business.

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

Pentair plc (PNR): PNR is 3.51% of the 13F portfolio stake established in Q2 2015 at prices between $40 and $46 and almost doubled the following quarter at prices between $34 and $46. The stock currently trades at $43.07. There was an ~11% reduction in Q2 2018 at $42.15 per share and that was followed with a ~12% selling last quarter at prices between $42 and $45.50. This quarter saw a ~30% further selling at prices between $36 and $44. Trian still controls 4.95% of the business.

Note: The prices quoted above are adjusted for the nVent Electric (NVT) separation that closed on May 1st, 2018. Following that transaction, Ed Garden stepped down from the board. In September, Matthew Peltz also resigned.

Kept Steady:

Wendy’s Company (WEN): The WEN stake goes back to 2005 when Trian Fund Management was founded. The position has fluctuated over the years. Recent activity follows: There was a ~14% reduction in Q2 2017 at $15.97 and that was followed with a similar reduction in Q1 2018 at ~$16.50. Q2 2018 also saw a ~7% trimming at around the same price. The stock currently trades at $17.38. The position is now at 5.35% of the 13F portfolio.

Note: In December 2015, Matthew Peltz was added to Wendy’s board. Nelson Peltz is the Chairman of the Board (non-executive chairman since June 2007). Trian controls ~13% of the business.

nVent Electric plc (NVT): NVT is 4.27% of the 13F portfolio stake established as a result of their separation from Pentair plc that closed on May 1st. Later in the same month, around 1.5M shares were purchased at prices between $24 and $28. Peltz controls 9.85% of the business. NVT started trading at ~$25 and it now goes for $27.44.

The spreadsheet below highlights changes to Peltz’s 13F stock holdings in Q4 2018:

Nelson Peltz - Trian Fund Management - Q4 2018 13F Report Q/Q Comparison

Disclosure: I am/we are long GE. 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.