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Billionaire Nelson Peltz’s Top 8 Stock Picks

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Fahad Saleem
·8 min read
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In this article we take a look at billionaire Nelson Peltz's top stock picks as of the end of the fourth quarter of 2020. You can skip our detailed analysis of Peltz's investment strategy and his hedge fund's performance and go to Billionaire Nelson Peltz's Top 5 Stock Picks.

Nelson Peltz is an American billionaire and activist hedge fund manager who founded Trian Fund Management, along with Ed Garden and Peter May, in 2005. The fund has over $6.7 billion in managed securities as of the end of the fourth quarter. Peltz usually invests in underperforming, undervalued companies and works with (or forces) their management to execute operational turnarounds.

Nelson Peltz's Activism and Investment Philosophy

The 78-year-old billionaire who was born to a Jewish family in New York is famous for his proxy fight to win a board seat at Procter & Gamble back in 2017. At that time, Peltz’s hedge fund had $3.3 billion worth of P&G shares. The investor, who was not happy with the company’s “suffocating bureaucracy” which he thought was making it difficult for the company to adapt to change, was later invited by the company to join its board in 2018. During an interview in 2019, Peltz said that he and P&G CEO David Taylor were “getting along so well.” As of the end of the fourth quarter of 2020, Procter & Gamble is the second-biggest stock holding in Trian Fund’s portfolio.

Nelson Peltz's Hedge Fund Performance

According to data compiled by Bloomberg, Nelson Peltz’s hedge fund lost 16% in March as the coronavirus crisis started hammering the world’s economy. This extended Trian’s losses for the year ending March 31, 2020, to about 25%. That’s why in September last year we mentioned why you should avoid picking Pelt’z portfolio stocks. Peltz’s hedge fund’s losses are a manifestation of a broader problem the hedge fund industry is facing. Its reputation has been tarnished in the last decade, during which its hedged returns couldn’t keep up with the unhedged returns of the market indices. On the other hand, Insider Monkey’s research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 88 percentage points since March 2017. Between March 2017 and February 5th 2021 our monthly newsletter’s stock picks returned 187.5%, vs. 75.8% for the SPY. Our stock picks outperformed the market by more than 111 percentage points (see the details here). We were also able to identify in advance a select group of hedge fund holdings that significantly underperformed the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 16. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to. You can subscribe to our free newsletter on our homepage to receive our stories in your inbox.

From a Delivery Guy to Billion-Dollar Companies

Peltz’s favorite sectors include consumer staples. Perhaps this has to do with his past. In 1963, Peltz dropped out of the Wharton School and became a delivery driver for a wholesale food distribution business founded by his grandfather. With a free hand to expand the business, Peltz with his brother worked for 15 years in the company and diversified its products into categories like frozen and ready-to-cook foods. Peltz eventually took his company public and sold its food service business to a group of investors.

Peltz is a master at turning around businesses and making them profitable. The way he turned around Snapple after buying it from Quaker Oats became a textbook example of how to own a business and take it to its real potential value. Peltz had bought Snapple from Quaker for $300 million and sold it for $1 billion to Cadbury Schweppes after just 3 years.

Last year, the billionaire talked about globalization, economy and jobs in an interview

"There are lots of different kind of jobs. One job, you can work in a steel mill, another job you can sit behind the computer. There are lots of different jobs, but the fact is, globalization is absolutely here. That doesn't mean that we have to export jobs. I don't think they're mutually exclusive, I think we can enjoy globalization as Americans. But we learned through this, this past pandemic and we learned that we are better off if we are going to import things. Let's import them to Mexico, and Canada and not ship them across the Pacific or the Atlantic. We learned that very early this year, whether it was face masks or gloves or all the other stuff. We can make it here... This country was founded almost 250 years ago, and one of the things that was founded was freedom and capitalism. I'm not a Republican and I'm not a Democrat, but I am a capitalist, and I do believe in freedom. The fact is that, what Biden and his group stand for, that's not anything that America has stood for, that we fought all the wars for, that we fought for our freedom for. The right thing to do is to do our best and earn a living through our hard work. That's what this place stands for."

Nelson Peltz's Top 8 Stock Picks
Nelson Peltz's Top 8 Stock Picks

Nelson Peltz of Trian Partners

Let’s start our list of Nelson Peltz’s top 8 stock picks.

8. General Electric Company (NYSE: GE)

Value: $347,702,000 Percent of Nelson Peltz’s 13F Portfolio: 5.14% Number of Hedge Fund Holders: 69

Iconic multinational conglomerate General Electric ranks 8th on the list of billionaire Nelson Peltz’s top 8 stock picks. GE shares have gained about 70% in value over the last 12 months. Morgan Stanley recently upped its price target for the stock to $17 from $13 and reiterated an Overweight rating. The firm said that the company’s aviation segment which suffered heavy losses amid the coronavirus crisis is expected to rebound starting 2023. AerCap (NYSE:AER) recently confirmed media reports that it is in talks with General Electric to acquire GE Capital Aviation Services.

With a $1.4 billion stake in General Electric, Eagle Capital Management owns 125.1 million shares of the company as of the end of the fourth quarter of 2020. Our database shows that 69 hedge funds held stakes in GE at the end of the fourth quarter, versus 45 funds at the end of the third quarter.

In their Q3 2020 investor letter, Longleaf Partners highlighted a few stocks and General Electric Co (NYSE:GE) is one of them.

Here is what Longleaf Partners’ said:

"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 (NYSE: JHG)

Value: $532,079,000 Percent of Nelson Peltz’s 13F Portfolio: 7.87% Number of Hedge Fund Holders: 22

U.K.-based Janus Henderson is an asset- management company offering products and services for both institutional and retail investors in various categories including equities, fixed income assets and alternatives. The stock is down 6% year to date. However, it has gained about 60% over the last 12 months. Earlier in February, the company declared a quarterly dividend of $0.36 per share. It has a dividend yield of 4.7%.

As of the end of the fourth quarter, 22 hedge funds in Insider Monkey’s database of 887 funds held stakes in JHG, compared to 21 funds in the third quarter. Nelson Peltz's Trian Partners is the company’s most significant stakeholder, with 16.4 million shares worth $532.1 million.

6. The Wendy's Company (NASDAQ: WEN)

Value: $583,743,000 Percent of Nelson Peltz’s 13F Portfolio: 8.63% Number of Hedge Fund Holders: 31

Wendy’s and Nelson Peltz go back a long way. The billionaire merged his Triarc Co. with the burger chain Wendy's in 2008 to form Wendy's Arby's Group. The company then sold Arby's to Roark Capital Group and changed its name to The Wendy's Company. Peltz is currently a non-executive chairman of Wendy's Company. The company operates in 29 countries and has over 6500 stores in the U.S. The stock is up 14% over the last 12 months.

There were 31 hedge funds in our database that held stakes in Wendy's at the end of the fourth quarter, compared to 27 funds in the third quarter. Trian Partners is the company’s most significant stakeholder, with 26.6 million shares worth $583.7 million.

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

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Disclosure: None. Nelson Peltz's Top 8 Stock Picks is originally published on Insider Monkey.