MDLZ - Tracking Nelson Peltz's Trian Fund Management Portfolio - Q4 2022 Update

2023-03-14 05:09:11 ET

Summary

• Nelson Peltz’s 13F portfolio value increased from $3.80B to $4.87B this quarter. The number of positions remained steady at 8.
• Trian Fund Management added Walt Disney during the quarter.
• The top three positions are Ferguson plc, Invesco Ltd, and Walt Disney. They add up to 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 2/15/2023. 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 2022.

This quarter, Peltz's 13F portfolio value increased ~28% from $3.80B to $4.87B. The number of holdings remained steady at 8. The top three holdings are at two-thirds of the 13F stock portfolio: Ferguson plc, Invesco Ltd, and Walt Disney. To know more about activist investing, check out Deep Value: Why Activist Investors and Other Contrarians Battle for Control of Losing Corporations .

Note: Trian Fund has a 1.5% ownership stake in London listed Unilever PLC ( UL ). The activist position was acquired last January and Nelson Peltz was appointed to the board on May 31st.

New Stakes:

Walt Disney ( DIS ): DIS is a large (top three) ~16% of the portfolio activist stake established this quarter at prices between ~$84 and ~$107. The stock currently trades at $92.60.

Stake Disposals:

Procter & Gamble ( PG ): The 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. There was a two-thirds selling in Q2 2020 at ~$115 per share. The five quarters through Q3 2021 had seen another ~50% reduction at prices between ~$121 and ~$145. Next quarter saw the stake almost sold out at prices between ~$139 and ~$164. The remainder stake was disposed this quarter. The stock currently trades at ~$138.

Note: 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 re-organization 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 2019, Peltz indicated his reorganization plan is "under very serious consideration" by the company's board. A reorganization plan followed in November.

Stake Decreases:

Sysco Corporation ( SYY ): SYY stake 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. Recent activity follows. The position was reduced by ~25% in Q4 2018 at ~$66.30 and by another ~18% in Q2 2019 at around the same price. Last two years saw the large stake reduced to a minutely small position at prices between ~$52 and ~$89. The stock currently trades at ~$74. They realized gains.

Kept Steady:

Ferguson plc ( FERG ) : FERG is currently the largest position in the portfolio at ~29%. It came about as a result of Ferguson's dual listing in NYSE in early March. Trian's position goes back to June 2019 when they acquired a ~6% ownership interest in Ferguson plc. The position was not in the 13F reports as they purchased the shares listed in London which is not in the realm of 13F reports. Their primary thesis was that Ferguson stock was mispriced due to it being listed in UK despite conducting all of its business in North America. There was a ~15% selling in H2 2021 at prices between ~$140 and ~$181. Q2 2022 saw a similar increase at prices between ~$106 and ~$139. The stock currently trades at ~$134. There was a ~13% trimming last quarter.

Note: They now control ~5.2% of the business.

Invesco Ltd. ( IVZ ): The ~21% IVZ stake was purchased in Q2 2020 at prices between $6.70 and $11.55. Next quarter saw the beneficial stake increased by roughly two-thirds at ~$11. The two quarters through Q1 2022 also saw ~47% stake increase at prices between ~$18.50 and ~$26.50. The stock is now at ~$16.

Janus Henderson Group plc ( JHG ): JHG is currently the third-largest position at ~15% of the portfolio. It was established in Q2 2020 at prices between ~$14 and ~$26. Next quarter saw the stake doubled at ~$20 cost-basis. There was another stake doubling over the last four quarters at prices between ~$30 and ~$48. The stock currently trades at $25.40.

Note: Trian Fund controls ~19% of the business. Two of Trian's representatives are on Janus Henderson Group's board as of 2/2022.

Wendy's Company ( WEN ): The Wendy's 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. There has been minor trimming since. The stock currently trades at $20.43. The position is now at ~12% of the 13F portfolio.

Note 1: Family trusts connected to Trian also own shares of Wendy's. Including those, the total ownership is at ~38M shares (~18% of the business).

Note 2: 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).

General Electric ( GE ): The GE position is at 6.93% of the 13F portfolio. The stake was established in Q2 2015 and increased by ~83% the following quarter at an overall cost-basis of ~$160. Q4 2015 saw a ~14% trimming at prices between ~$200 and ~$250. The stock currently trades well below their purchase price ranges at ~$89. There was a ~45% selling in Q3 2020 at ~$50. Last two quarters have seen marginal increases.

Note 1: GE stock had a 1-for-8 reverse stock split in August 2021. The prices quoted above are adjusted.

Note 2: 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 2018, Larry Culp (formerly CEO at Danaher) was named the CEO.

Mondelez International ( MDLZ ): The original MDLZ 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. Q1 2020 saw a ~15% trimming at ~$58 and that was followed with a ~23% selling in Q3 2020 at around the same price. Q1 2021 saw another ~25% selling at ~$56 per share. Next two quarters also saw a ~15% reduction at ~$62 per share. Q4 2021 saw the stake sold down to a minutely small position at prices between ~$58 and ~$66. The stock currently trades at $65.54.

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. In March 2018, Nelson Peltz left the board and was replaced by Trian's president Peter May.

The spreadsheet below highlights changes to Peltz's 13F stock holdings in Q4 2022:

For further details see: