Nelson Peltz is on a roll this year - and he has company.
|| Trian Partners founder Nelson Peltz. Photo:
The co-founder of New York-based activist hedge fund firm
Trian Partners is one of a handful of managers who employ
activist techniques that are enjoying big gains this year. But
Peltz is the leader of the pack so far. His eponymous offshore
fund, Trian Partners, surged another 4.7 percent in September,
bringing its gain for the first three quarters of the year to
30 percent, while the domestic partnership was up 4.6 percent
last month and is up 29 percent for the year. This makes Trian
Partners among the best-performing hedge funds this year
through the end of the third quarter.
Jeffrey Ubben's ValueAct Capital Master Fund, managed by his
San Francisco-based hedge fund firm, ValueAct Capital, added
5.8 percent in the third quarter and is now up 19.8 percent
through the first three quarters of the year. And last week we
reported that Daniel Loeb's Third Point Offshore Fund, managed
by New York-based Third Point, is up 18 percent for the year
through September. This compares with a 17.9 percent gain for
the S&P 500 in the first three quarters, excluding
Other activists are also faring pretty well, even though
they lag the overall market. Barry Rosenstein's New York-based
Jana Partners gained 14.2 percent this year through September
30, while David Einhorn's New York-based Greenlight Capital,
which is a more selective activist investor, was up 12.2
percent. Paul Singer's two main hedge funds, Elliott Associates
and Elliott International, are up 9.3 percent and 9.0 percent,
respectively, for the first three quarters of the year. Only
William Ackman's New York-based Pershing Square Capital
Management is struggling this year, posting a 0.5 percent gain
through nine months, thanks to big losses betting on the shares
of J.C. Penney Co. and against the stock of Herbalife.
Trian, founded by Peltz, Peter May and Edward Garden, now
manages $7.36 billion in assets, according to its most recent
monthly snapshot, dated October 4. Both its onshore and
offshore hedge funds had eight core longs and one core short as
of October 1, and both funds had a net exposure of roughly 100
percent. However, the offshore fund was 123.7 percent long and
24 percent short, while the onshore fund was 103.2 percent long
and just 3.1 percent short.
The firm's gains have been driven in part by industrial
conglomerate Ingersoll-Rand, which is up 35 percent this year.
Two companies that the activist is urging to merge with each
other - food company Mondelez International and beverage giant
PepsiCo - are up 20 percent and 16 percent, respectively,
through the first nine months. Two new holdings disclosed on
Trian's second-quarter 13F filing, chemical company DuPont and
auction house Sotheby's, are also doing well.
Trian owns more than two million shares, or 3 percent, of
Sotheby's. The company has become a target of two other
activist investors - Loeb's Third Point and San Francisco-based
Marcato Capital Management, headed by Richard T. McGuire III -
but so far Trian has not shown any interest in getting into the
fray with management. Third Point recently raised its stake in
Sotheby's to 9.3 percent and ratcheted up its rhetoric over its
Shares of Sotheby's are up between 20 percent and 50
percent, depending on when Trian started scooping up the
shares. DuPont is up between 11 percent and 20 percent since
Trian started building its position in the second quarter.
ValueAct, which held 14 stocks at the end of the second
quarter, has especially been driven by four of them: Microsoft,
its largest holding, which is up more than 17 percent since the
firm disclosed its initial stake at the end of the first
quarter; No. 4 holding Adobe Systems, which is up 37 percent
this year; No. 3 holding (as of the end of the third quarter)
Valeant Pharmaceuticals International, up 85 percent; and KAR
Auction Services, a relatively small position, which has gained
40 percent this year.
We recently reported that the San Francisco-based hedge fund
firm lifted its ownership in Rockwell Collins, a supplier to
airplane manufacturers, to 9.7 percent of the total shares. As
a result, it is ValueAct's fifth-largest holding.
Third Point, meanwhile, made $665 million in late July when
it sold its huge activist stake in Yahoo. The Internet
company's stock - if not its profitability - has been turned
around in the past year under new CEO Marissa Mayer.
Jana is also very busy these days. Entering the third
quarter, Jana's two largest positions in individual stocks were
activist stakes in fertilizer company Agrium and oilfield
services company Oil States International. In mid-August, Jana
boosted its stake in the latter to 6.45 million shares. Oil
States is up about 35 percent since Jana disclosed its stake in
Its activist stake in chemical company Ashland, its
third-largest individual stock position, is up more than 16
percent since Jana reported its initial stake at the end of
March. Agrium was down 16 percent through the first nine months
of the year.
More recently, last week Jana disclosed a new activist
position: a 13.5 percent stake in Outerwall, best known for its
Redbox movie rental vending machines. And last month Jana
disclosed that it owns 14.95 million shares of supermarket
chain Safeway, including options to purchase 3.53 million
shares of stock, for a total stake of 6.2 percent.