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Nelson Peltz's Trian Partners Trims 2 Holdings

Guru's firm reduces its Mondelez International and Procter & Gamble positions

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Sydnee Gatewood
Aug 13, 2021

Summary

  • The firm manages a concentrated portfolio of undervalued and underperforming companies.
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Trian Partners CEO

Nelson Peltz (Trades, Portfolio) disclosed reductions in two of the firm’s holdings earlier this week.

The New York-based firm, which was founded in 2005 by Peltz, Peter May and Edward Garden, utilizes fundamental analysis to make its investment decisions, selecting a concentrated number of high-quality stocks that are undervalued and underperforming. It then works with management teams and boards to execute operational and strategic initiatives to drive growth and create value for shareholders.

According to GuruFocus Real-Time Picks, a Premium feature, the firm trimmed its Mondelez International Inc. (

MDLZ, Financial) stake by 9.66% and its Procter & Gamble Co. (PG, Financial) position by 5.44% on Aug. 10.

Mondelez International

With an impact of -0.67% on the equity portfolio, the guru’s firm sold 906,850 shares of Mondelez International (

MDLZ, Financial). The stock traded for an average price of $62.20 per share on the day of the transaction.

It now holds 8.47 million shares total, which represent 6.28% of the equity portfolio and is Trian’s sixth-largest holding. GuruFocus estimates the firm has gained 53.71% on the long-held investment.

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The Deerfield, Illinois-based confectionary company, which is known for its Cadbury, Milka, Toblerone and Sour Patch Kids candy products, as well as Oreo cookies, Wheat Thins crackers, Ritz crackers products and many other snacks, has an $88.34 billion market cap; its shares were trading around $63.21on Friday with a price-earnings ratio of 20.92, a price-book ratio of 3.22and a price-sales ratio of 3.25.

The GF Value Line shows the stock is fairly valued currently based on its historical ratios, past performance and future earnings projections.

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The valuation rank of 3 out of 10 indicates overvaluation, however, since the share price, price-book and price-sales ratios are all near 10-year highs.

Mondelez’s financial strength was rated 4 out of 10 by GuruFocus. Although the company has issued approximately $1.7 billion in new long-term debt over the last three years, it is at a manageable level due to having adequate interest coverage. The Altman Z-Score of 2.51 suggests the company is under some financial pressure. The return on invested capital also eclipses the weighted average cost of capital, indicating good value creation as the company grows.

Supported by an expanding operating margin, strong returns on equity, assets and capital that outperform more than half of its industry peers and a high Piotroski F-Score of 7, which indicates business conditions are healthy, the company’s profitability scored a 7 out of 10 rating. It also has a predictability rank of one out of five stars. GuruFocus says companies with this rank return, on average, 1.1% annually.

Of the gurus invested in Mondelez,

Diamond Hill Capital (Trades, Portfolio) has the largest stake with 0.69% of outstanding shares. Other top guru shareholders include Hotchkis & Wiley, Pioneer Investments (Trades, Portfolio), Ray Dalio (Trades, Portfolio), Jim Simons (Trades, Portfolio)’ Renaissance Technologies, Mario Gabelli (Trades, Portfolio) and Elfun Trusts (Trades, Portfolio).

Procter & Gamble

Impacting the equity portfolio by -0.53%, Trian sold 315,261 shares of Procter & Gamble (

PG, Financial). On the day of the transaction, shares traded for an average price of $142.15 each.

Peltz’s firm now holds 5.47 million shares total, accounting for 9.25% of the equity portfolio and is its third-largest holding. GuruFocus data shows the firm has gained 39.65% on the investment.

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The consumer goods giant headquartered in Cincinnati, which owns popular household brands like Gillette, Pampers, Tide and Charmin, has a market cap of $348.2 billion; its shares were trading around $143.37 on Friday with a price-earnings ratio of 26.12, a price-book ratio of 7.66 and a price-sales ratio of 4.9.

According to the GF Value Line, the stock is fairly valued currently.

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The valuation rank of 2 out of 10 leans more toward overvaluation, however, since the share price, price-book and price-sales ratios are all closing in on 10-year highs.

GuruFocus rated Procter & Gamble’s financial strength 5 out of 10 on the back of a comfortable level of interest coverage as well as a robust Altman Z-Score of 5.15, which suggests the company is in good standing. The ROIC also overshadows the WACC, suggesting good value creation is occurring.

The company’s profitability fared even better, scoring an 8 out of 10 rating on the back of an expanding operating margin, strong returns that outperform a majority of industry peers and a high Piotroski F-Score of 8. Procter & Gamble also has a one-star predictability rank.

With a 0.25% stake, Pioneer is the company’s largest guru shareholder. Diamond Hill,

Yacktman Asset Management (Trades, Portfolio), Dalio and the MS Global Franchise Fund also have significant holdings in the stock.

Portfolio composition

Nearly 40% of Peltz’s $8.46 billion equity portfolio, which was composed of nine stocks as of the end of the first quarter, is invested in the consumer defensive sector, followed by a slightly smaller exposure to the industrials space.

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Other companies the firm holds as of March 31 are Sysco Corp. (

SYY, Financial), Ferguson PLC (FERG, Financial), Comcast Corp. (CMCSA, Financial), Invesco Ltd. (IVZ, Financial), The Wendy’s Co. (WEN, Financial), Janus Henderson Group PLC (JHG, Financial) and General Electric Co. (GE, Financial).

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Disclosures

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