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Billionaire Nelson Peltz’s Favorite Stocks

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Jose Karlo Mari Tottoc
·10 min read
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In this article, we presented billionaire Nelson Peltz' top 10 stock picks. Click to skip ahead and see Billionaire Nelson Peltz's Top 5 Stock Picks.

Being one of the most fortunate activist investor, Nelson Peltz, has a net worth of $1.7 billion. He co-founded the activist hedge fund Trian Fund Management L.P., a multi-billion dollar investment management firm that has investors ranging from insurance companies to pension funds and university endowments and currently has around $9 billion in assets under management. Peltz is also a Non-Executive Chairman of Wendy's Company (NASDAQ: WEN), Director of Legg Mason, Procter & Gamble (NYSE: PG), the Madison Square Garden Company (NYSE: MSGS), and Sysco (NYSE: SYY).

TRIAN PARTNERS
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Nelson Peltz of Trian Partners

The 78-year-old billionaire Peltz was born in Brooklyn, New York in 1942. He was once a truck driver for his family's wholesale food distribution business. He went to get a degree at the University of Pennsylvania and the Wharton School but eventually dropped out in 1963. He was given a stake in the family business and was able to grow his humble share into a massive sum of wealth.

Nelson Peltz co-founded Trian Fund Management in 2005. The activist hedge fund returned a little bit less than 12% annually between 2014 and 2018, gained around 30% in 2019, but gave back some of those gains during the first half of 2020 after losing 13%.

Billionaire Nelson Peltz on the Capitol Riot: We are not a Banana Republic

"It was a stain on America.". This is what billionaire Nelson Peltz has to say in a CNBC interview, about the recent incident of the riot in the US Capitol. He also added by saying that the lesson learned here is that the American people can't continue to have elected officials who fight with one another since according to him, the enemy is 'outside the room and not across the aisle'.

The billionaire investor is a longtime supporter and friend of President Trump but he posted a statement condemning the riot that as he said, was initiated by Trump. "We condemn President Trump's efforts to overturn the election results which culminated in yesterday's shocking events at our Capitol,", he marked, while saying that Trump 'must' commit to a peaceful transfer of power. "We also implore President-elect Biden and Congressional leaders to stop the infighting and work together for the good of our country. Every single American citizen deserves better governance.".

Katherine Welles/Shutterstock.com

"We're not a banana republic. This is the United States,". Peltz described the incident as sad, scary, and that it was a stain on America. "What happened(the riot) is a disgrace and I as an American, I'm embarrassed. I did not vote for Trump in 2016, I voted for him in this past election November and I'm sorry I did that,". Nelson Peltz stated that he supported many of Trump's policies, trade efforts, and economic policies that he thinks is good for the country.

"America has been to hell and back. It became so tribal and I just hope that president-elect Biden will act to bring us together... We need to heal from Trump. It was really a devastating blow and we just can't go on,". Peltz marked that the economic policies of the outgoing administration are something that America needed for decades. He hopes that President-Elect Biden will not just 'throw the baby out with a bathwater'.

Evan El-Amin/Shutterstock.com

Nelson Peltz emphasized that priorities must be 'America First' and the personal political agendas of the different parties must be set aside for later. He concluded by saying, "Trump could have accepted the results. He could have offered his friendship, his support, and his help of transition to Biden. Had he done that, his legacy would be 180 degrees different from what it is today.".

In this article we are going to take a look at billionaire Nelson Peltz's 13F portfolio to uncover some potential investment ideas. We analyzed the performance of Nelson Peltz's historical stock picks a couple of years ago in one of the issues of our monthly activist newsletter. Peltz's entire portfolio of stock picks returned an average of 0.94% per month between 2006 and 2017, outperforming the S&P 500 Index's 0.8% monthly return during the same period. This isn't a huge outperformance figure but implies that some of Peltz's stock picks significantly beat the market.

In our monthly activist newsletter we share stock picks from activist investors, hedge fund investor letters, investment conferences, as well as our in-house research. Our portfolio of stock picks outperformed the S&P 500 ETFs by more than 88 percentage points since March 2017 (see the details here). That's why we believe we can outperform the market by analyzing hedge funds' portfolios for promising stock ideas.

Let’s start reviewing billionaire Nelson Peltz's top 10 stock picks now.

10. The Bank of New York Mellon Corporation (BK)

BK is a multinational investment company that brings forth financial services for institutions, corporations, or individual venture capitalists.

According to its website, "We innovate and collaborate with some of the most influential partners in the world—including our own competitors—to support our clients in reaching new heights. Our open-architecture enterprise platform helps us uncover compelling insights and engineer optimal client experiences to unlock new potential for all."

Trian Partners already sold all their Bank of New York Mellon Corp shares. First Eagle Investment Management explained why investors are bearish in their 2020 Q3 investor letter:

“The world’s largest custody bank, Bank of New York Mellon has been challenged by the persistently low-rate environment. While custody tends to be a wide-moat business, revenue generation is highly sensitive to net interest margins. Low rates have also hurt Bank of New York’s other primary line of business—investment management—as it has been forced to waive fees on its money market funds to preserve their net asset value.”

9. nVent Electric plc (NVT)

nVent Electric is a $2.2 billion renowned electrical company that is distinguished for its reliable electric products. NVT became public in 2018 after its spin-off from Pentair (PNT). The split of Pentair into two core business-focused companies is the result of years of work, not just on behalf of the management, but also by renowned activist fund Trian Partners.

Following the spin-off, nVent Electric became a company focused on electric heat tracing solutions, heat management systems, electrical and fastening solutions and electronic protection. Its portfolio includes brands like Raychem, Tracer, Schoff, Hoffman, Caddy and Erico. The bulk of nVent’s revenue comes from the Industrial sector, which accounts for 45% of the sales, followed by Commercial and Residential sectors (27%), Energy (16%) and Infrastructure (12%).

nVent Electric has a strong product portfolio and solid sales and a healthy free cash flow before the coronavirus pandemic. At a forward P/E of 14, nVent Electric is priced more attractively than most of its industry peers. Nelson Peltz had $103,088,000 worth of NVT shares in his 13F portfolio at the end of September.

8. General Electric Company (GE)

General Electric is a 128-year-old premier digital industrial company that offers different products and various services whether it be from power generation, aircraft engines, oil and gas production materials, financing, and more.

Composed of 200,000 employees around 130 countries, it can be said that General Electric, founded by Thomas Edison, is a superior multinational conglomerate firm that aims to build a better world through its dedicated service, leading technology, and global assets.

A $200,502,000 stake of GE shares are currently present in Nelson Peltz's portfolio which amounts to 32,183,233 number of shares and a 3.31% slice of his total 13F portfolio. Here is what Longleaf Partners said about the stock in its 2020 Q3 investor letter:

“General Electric (GE) (-9%, -0.41%), the industrial conglomerate, was also a detractor in the quarter due to the slow recovery of the commercial aerospace industry, where monthly departures are improving but are still down 40% against last year. GE Aviation’s commercial engine and maintenance revenues have fallen by half, and the segment will not approach its 2019 profits for another few years. We have taken down our appraisal value to reflect this new reality. CEO Larry Culp has responded with necessary cost cuts and announced that consolidated GE will be cash profitable in the second half of this year and 2021. In Healthcare, where GE’s quarterly revenues fell 4%, scanning procedures and pharmaceutical diagnostics sales are recovering. GE Power, despite reporting -9% revenues for the quarter, has begun receiving significant new orders in natural gas and renewable energy equipment, while service sales rebound back near normal levels. We expect each one of GE’s segments to keep improving revenues and profitability over the next several years, helping the company to reach its target of high-single digit FCF margins. Today, the stock trades at less than half of our conservative appraisal value for this world-class collection of businesses.”

7. Janus Henderson Group plc (JHG)

As a company that pursues specific investments across any asset class, Janus Henderson Group supervises wide-range investment products for institutional and retail clients. It operates on full scale in its geographic regions which include the United States, Asia, Australia, and Europe.

It can be noted that the union of Janus Capital Group and Henderson Global Investors in 2017 resulted in the formation of the multinational asset management firm, Janus Henderson Group plc, which currently has $370 billion worth of assets under management.

Nelson Peltz recently acquired 17,666,612 shares of JHG that amounts to $383,719,000 and represents 6.34% of Trian's entire equity value. Peltz also acquired a similar sized position in IVZ, so the possibility of a merger of these companies is in the cards now.

6. Invesco Ltd. (IVZ)

Invesco Ltd. is a liberated investment management firm that holds offices in 20+ different countries worldwide. It manages assets that amount to a huge $1.2 trillion and is composed of specialized investment teams. With over 8,000 employees globally, Invesco pledges to center its attention on catering to its clients' needs.

Peltz's Trian Fund currently holds a $419,196,000 stake at Invesco. The activist fund owns 36,739,343 number of shares of the company that is equivalent to 6.92% of its 13F portfolio and was able to deliver an 80% return since the end of September.

In an interview with CNBC, Invesco's Head of US Government Affairs, Andy Blocker talked about the resiliency of the US markets, and why we haven't seen any major movement in the market with regards to the recent riot at the US Capitol. Here's a quote from Blocker:

"The market saw that our democrat system held up and so that's why you haven't seen these big gyrations. With Democrats winning the Senate, that gives the Biden administration a chance to actually implement some of its agenda. He is totally focused on Covid-19. That means we expect the Covid-19 relief package to be larger than it would have otherwise been in a split government and we expect it to give state and local government help as well as more relief for individuals. Even though we have 40+ infrastructure weeks during the Trump administration, I think we can actually get infrastructure relief. And then comes tax increases, because you're going to have to pay for infrastructure relief, you're going to need some tax increases and we think first in line, corporate taxes. We see that a little bit later in the year. Any growth stocks, I think that's basically putting the reflation trade back on and the Covid-19 relief infrastructure, is all into that direction and I think the tax increase part really comes in the back end of that."

Click to continue reading and see Billionaire Nelson Peltz's Top 5 Stock Picks.

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Disclosure: None. Billionaire Nelson Peltz's Top 10 Stock Picks is originally published at Insider Monkey.