Trian Fund Trims Wendy's Position

Nelson Peltz's activist firm Trian Fund Management has filed an amended 13D with the SEC regarding their stake in Wendy's (WEN).  Per the filing, Trian now owns 15.85% of the company with over 57.6 million shares

This is a reduction in their position size by over 7 million shares.  Trian sold shares on June 18th at a price of $11.37 in a private transaction with the company.  Peltz and his family also own additional WEN shares and were out trimming their positions as well.  This is not necessarily new news, as we previously highlighted how Trian was planning to reduce its WEN stake.

The filing notes that, "The number of shares Trian Group plans to sell is designed to result in at least a 20% reduction of the Trian Group's ownership of Common Stock in order to avoid adverse federal income tax consequences."

Per Google Finance, Wendy's is "the parent company of its wholly owned subsidiary holding company Wendy’s Restaurants, LLC (Wendy’s Restaurants). Wendy’s Restaurants is the parent company of Wendy’s International, LLC (Wendy’s), which is the owner and franchisor of the Wendy’s restaurant system in the United States. Wendy’s is the quick-service restaurant company in the hamburger sandwich segment. Wendy’s is primarily engaged in the business of operating, developing and franchising a system of distinctive quick-service restaurants serving food. Wendy’s Restaurants is the parent company of Wendy’s International, LLC (Wendy’s), which is the owner and franchisor of the Wendy’s restaurant system in the United States."

Peltz's Trian Fund Reduces Wendy's Stake

Nelson Peltz's activist investment firm Trian Partners recently filed a 13D with the SEC regarding their stake in Wendy's (WEN).  Per the filing, they will be reducing their Wendy's (WEN) stake.  The company is buying back shares, including $211 million from Trian.

Trian's plan is to reduce their stake in Wendy's down from their current almost 25% to between 17% and 19.68% in the next couple of months.  In addition to selling shares in the buyback program, they'll also divest shares via the open market or other transactions.

Per Google Finance, Wendy's is "a quick-service restaurant company in the hamburger sandwich segment."

Nelson Peltz's Trian Partners Trims Wendy's Stake

Nelson Peltz's activist investment firm Trian Partners recently filed a Form 4 with the SEC on shares of Wendy's (WEN).

According to the filing, Trian Fund Management sold 2 million shares of Wendy's (WEN) on February 25th at a price of $10.2.  After the sale, they're still left with over 64.8 million shares.

Per Google Finance, Wendy's is "a quick-service restaurant company in the hamburger sandwich segment. Wendy’s is primarily engaged in the business of operating, developing and franchising a system of distinctive quick-service restaurants serving food."

You can view additional recent activity from Trian here.

Trian Partners Sells Danone & State Street, Trims Family Dollar & Ingersoll Rand Stakes: Q2 Letter

Nelson Peltz's investment firm Trian Partners recently released its second quarter letter.  In it, they detail that they sold out of their investment in Danone (DANOY) as well as State Street (STT).  Additionally, the firm mentions that it has recently trimmed its positions in Ingersoll Rand (IR) and Family Dollar (FDO).


New Mystery Investment

Peltz has built a new mystery position which he did not reveal in the letter.  He said that some of the above stakes were sold in order to partially fund their new mystery purchase.

Here's all they had to say about this new position:  It's "a company comprised of world class businesses where we see a path to superior value creation."

Andrew Ross Sorkin said that sources are pointing to Peltz acquiring a stake in DuPont (DD) back at the Delivering Alpha Conference last month, but Peltz didn't really confirm it when asked about it.

At any rate, here's their long portfolio composition by sector: 30% consumer staples, 28.1% consumer discretionary, 17.6% industrials, 13.9% financials, 10.4% basic materials, 0% other.


Other Highlights

Their Q2 letter also touches on their investments in PepsiCo (PEP) and Mondelez (MDLZ) and basically re-hash everything they laid out in their white paper on the companies which we highlighted recently.  Peltz also talked about his PEP & MDLZ stakes at the Delivering Alpha Conference too.

According to the letter, Trian also retains its positions in Lazard (LAZ), Legg Mason (LM), and Wendy's (WEN).  Their thesis on Legg Mason remains unchanged: "Better fund flows, strong free cash flow, and improving margins should allow the shares to be valued closer to peer averages."

In the second quarter, Trian's total firm assets hit an all-time peak of approximately $6.3 billion.  Net exposure finished the month at 100% net long (136.4% long and -36.4% short).

Trian Fund Management on Kraft, Family Dollar, & Wendy's (Investor Letter)

Nelson Peltz's Trian Fund Management finished 2011 up 3.9% in their Offshore Fund and up 5.6% in their Onshore Fund. Their year-end letter to investors touched on some of their largest investments:

On Kraft (KFT)

They established a new position in KFT during 2011 and their thesis was that scale "had become a vice, not a virtue" and they also thought it "offered a compelling risk-reward (one of the lowest forward earnings multiples in the packaged food space and an almost 4% dividend yield)."

The company announced it would split itself in two via a tax-free spinoff: a growth company (their global snacks business) and a cash company (a slower growth, North American grocery business). Trian believes this will lead to "reduced complexity; better resource allocation; margin expansion; and improved organic growth."

Bill Ackman's Pershing Square Capital also bought KFT in August.


On Family Dollar (FDO)

Peltz's firm first invested in mid-2010 and the thesis was that if operating metrics caught up to their closest competitor (Dollar General), the stock would trade higher. Trian offered to buy the company, but the board rejected the offer. Many investors thought this was a maneuver to invoke other takeover offers, but nothing materialized in that regard.

Since then, Family Dollar has implemented a new President, increased store openings, and renovated more stores. Bill Ackman also owns shares and has in the past laid out his FDO thesis.


On Wendy's (WEN)

Trian notes that the company divested its stake in fellow fast food chain Arby's in 2011 and it is now a pure play on the single Wendy's brand. The firm likes that the company's new menu items led to higher sales and that store level margins have improved.

In early December, Trian filed a 13D with the SEC that it was allowed to boost its ownership position in WEN to 32.5%, up from their 26.2% stake per an agreement with the company.


On Potential New Buys

In terms of other positions, the investment firm says that they expect to make 2-3 new core investments in 2012 as they've built a solid list of potential buys. Regarding what they're looking at, Trian writes:

"We like the large-capitalization profiles as these companies tend to be higher quality companies (companies with significant market shares, investment grade balance sheets, strong dividend paying capacity and attractive trading liquidity) where we attempt to minimize risk and maximize reward by making our investment at what we believe are attractive valuations and having a plan to make them more profitable."

Trian also believes the M&A landscape will pick up in the future.

For more from them, we've posted up Trian's bullish case for Tiffany & Co (TIF). And in recent portfolio activity from Nelson Peltz' firm, we've highlighted they've sold some H.J. Heinz (HNZ). They've done so largely because the company has traded at a premium to its competitors.

Nelson Peltz's Trian Fund: Latest Portfolio Activity

Nelson Peltz's Trian Fund Management recently filed an amended 13D with the SEC regarding shares of Tiffany & Co (TIF). Due to portfolio activity on January 20th, 2011, Trian has disclosed a 4.95% ownership stake in TIF with 6,260,809 shares.

Tiffany & Co (TIF)

This is a decrease in their position as they reported their recent sales in a Form 4 with the SEC. Peltz's firm sold TIF shares on January 18th, 19th, and 20th at weighted average prices ranging from $57.9484 to $59.2843, with the bulk of their sale coming at the latter price. In all, Peltz recently sold 600,000 shares of Tiffany & Co.

Trian originally filed its activist 13D on Tiffany back in February 2007. Their latest amended 13D contains standard boilerplate stating that they intend to continually review their investment.

Peltz's Background

Peltz is a well-known activist investor and takeover titan. Additionally, he is the former owner of Snapple and graces the Forbes' billionaire list. Interestingly enough, Peltz never received his college degree. He attended the Wharton School at the University of Pennsylvania, but left to work in his family's business of selling food.

He attributes one of his most valuable lessons to his father, who simply said, "get sales up and keep expenses down." He has obviously incorporated this advice into his everyday work with turning around companies. In potential targets, Peltz likes companies to have the following attributes: a good franchise, low leverage, and strong free cash flow. Peltz runs Trian with his business partner, Peter May, who has been with him since the Snapple days.

Wendy's Arby's Group (WEN)

Peltz's Trian also owns a sizable position in Wendy's Arby's Group (WEN) and the fast food company has just announced that it is putting the Arby's sandwich chain up for sale. Arby's originally merged with Wendy's back in 2008. Trian owns over 24% of the company.

In other portfolio holdings, Trian owns sizable chunks of Legg Mason (LM), H.J. Heinz (HNZ), Family Dollar (FDO), and State Street (STT). Given Peltz's background, it should come as no surprise that he mainly focuses on the food industry.

Head to our hedge fund portfolio tracking to see what stocks managers have been active in lately.

Per Google Finance, Tiffany & Co is "a holding company and conducts all business through its subsidiary companies. The Company’s principal subsidiary, Tiffany and Company, is a jeweler and specialty retailer whose principal merchandise offering is fine jewelry. The Company also sells timepieces, sterling silverware, china, crystal, stationery, fragrances and accessories."

Per Yahoo Finance, Wendy's Arby's "through its subsidiaries, operates as the owner and franchisor of the Wendy's and Arby's restaurant systems."

Latest Thoughts From John Burbank & Passport Capital: 3Q Investor Letter

John Burbank's hedge fund firm Passport Capital provides a glimpse as to their overall portfolio positioning in its third quarter letter. Passport's Global Fund has returned 23.1% annualized since inception in August of 2000. At the end of the third quarter, the fund was up 7.9% year to date and the firm manages over $5 billion. Passport's largest net long exposures were in basic materials and consumer. Overall, they ended the third quarter 95% long, 39% short, leaving them with net exposure of 56%.

Top Holdings

At the end of the third quarter, Passport's top ten equity positions represented 33% of their assets under management (AUM). The top 10 holdings are sorted by percentage of net asset value (NAV):

1. Riversdale Mining (RIV): 10% of NAV
2. Microsoft (MSFT): 4%
3. Exxon Mobil (XOM): 4%
4. Las Vegas Sands (LVS): 3%
5. Financial Technologies (FTECH): 2%
6. Tarpon Investimentos (TRPN3): 2%
7. CF Industries (CF): 2%
8. Wendy's Arby's Group (WEN): 2%
9. Labrador Iron Mines (LIM): 2%
10. Jordan Phosphate Mines (JOPH): 2%

Keep in mind that we've also detailed the rest of Passport's portfolio.


Equity Update: Riversdale Mining (RIV.AU)

Given that Riversdale is Passport's largest holding, it makes sense that they singled out a portion of their letter to provide commentary. On Monday, Riversdale said it was in talks with Rio Tinto (RTP), which is offering AUD $15 per share for the company and RIV shares traded north of AUD $16 on the news (around 15% higher than where it was trading prior to the news). So, Passport has already made some nice money on this play and it will be interesting to follow the developments. Overall though, Burbank definitely advocates hard assets.


Physical Gold

Passport also mentions that 8% of the fund's NAV is in physical gold. The hedge fund firm owns 100,000 ounces of the precious metal stored in Zurich. They highlight various purchases by central banks as a bullish indicator. However, they are also partially concerned by the fact that some gold miners have been de-hedging. As a result, Passport delta hedged their entire gold position. For more hedge fund advocates of gold, head to our in-depth post on John Paulson's gold fund as well as David Einhorn's preference of physical gold.


Added Large-Cap Multinational Stocks

During the third quarter, Burbank's firm also bought high quality large cap companies. This is a prevalent theme we've seen in hedge fund portfolios as of late. Regarding this theme, Burbank writes:

"Recently, we have begun adding certain large-cap, multinational stocks to our portfolio. These are the same stocks that we largely avoided for the last ten years. What has changed? For one, many such companies have dividend yields of greater than 3% and "earnings yields" of 6-9%. Compared to "risk-free" 10-year Treasuries (yielding 2.5% at quarter end), these are quite appealing. While these companies' future earnings and dividends are uncertain, we think they are very likely to rise over time given strong franchises (predictable pricing and market share) and meaningful exposures to faster-growing emerging markets. We have sought out companies we believe are characterized by strong management teams, powerful competitive moats, healthy balance sheets, predictable cash flows, and healthy growth prospects."

Companies that they recently added include Exxon Mobil (XOM) and Microsoft (MSFT). Oaktree Capital's Howard Marks has said to buy high quality large-caps as well. And for a specific look at MSFT, T2 Partners' Whitney Tilson has put together his investment thesis on Microsoft.

Embedded below is Passport Capital's third quarter letter to investors:



You can download a .pdf copy here.

For analysis of Passport's US equity longs, head to the new issue of our Hedge Fund Wisdom newsletter. And for more thoughts directly from Passport's founder, head to his presentation from the Value Investing Congress.