Investing

Billionaire Nelson Peltz Unveiled 3 New Stocks in His Very Focused Portfolio

Rich Duprey

Published: September 28, 2024 10:28 am

Nelson Peltz isn’t one to shy away from a fight. The billionaire activist investor has used his hedge fund Trian Fund Management to take on corporate giants. He’s launched very public proxy battles against PepsiCo (NASDAQ:PEP), Procter & Gamble (NYSE:PG), and most recently Disney (NYSE:DIS). 

He may not always be successful in gaining a board seat and turning around a company’s direction from the inside, but very often the companies he targets end up adopting many of the proposals he offered.

Peltz launched Trian in 2005 and he seeks out undervalued, high-quality companies to buy. Not every investment is an activist position, but he does aim to improve the performance of the companies he owns.

Trian has $7.1 billion in assets under management and there are just 11 stocks in his portfolio. After completely dumping food distribution giant Sysco (NYSE:SYY) and almost completely selling off his Disney stake, the billionaire added three new stocks to his portfolio. He hasn’t indicated an activist position with them yet, though that could always change.

Key Points About This Article:

• Nelson Peltz is willing to take on corporate boards of undervalued, high-quality companies in very public proxy fights.
• Peltz’s Trian Fund Management has over $7 billion in assets under management and just bought three new stocks in the high-focused hedge fund.
• If you’re looking for some stocks with huge potential, make sure to grab a free copy of our brand-new “The Next NVIDIA” report. It features a software stock we’re confident has 10X potential.

Rentokil Initial (RTO)

Peltz’s stake in termite and pest control company Rentokil Initial (NYSE:RTO) may not have started as an activist position, but after a surprise profit warning about its North American business, the U.K.-based company announced that Trian partner Brian Baldwin will be taking a seat on its board of directors on Oct. 1.

Rentokil owns the Terminix and Western Exterminator pest control companies as well as various hygiene service businesses. While it typically specialized in bolt-on acquisitions, in 2022 it launched a $6.7 billion “transformational” takeover of Terminix that made Rentokil the top pest control company in the U.S. It leapfrogged over Rollins (NYSE:ROL), best known for its Orkin brand, which has steadily rolled up the highly fragmented pest control industry under a “buy everything” strategy.

A slowing U.S. economy found Rentokil “over-resourced,” which led to a large revision lower in sales and profit forecasts. The stock dropped 20% on the news.

Peltz had acquired 470,000 shares of RTO stock in the second quarter, currently valued at just under $14 million. While it is the smallest position in Trian’s portfolio at less than 0.4% of the portfolio, it seems the billionaire is moving quickly to turn the pest management company’s business around.

U-Haul Holding (UHAL, UHAL-B)

The second stock Peltz bought was U-Haul Holding (NYSE:UHAL)(NYSE:UHAL-B), the moving truck rental company. The billionaire actually bought two separate tranches of stock, a smaller 390,000 share position in the Class A shares and a much larger 909,000-share stake in the Class B stock. The positions are valued at $24 million and $54.6 million, respectively.

The difference between the two classes is the Class A stock is voting shares while the Class B stock gets a quarterly dividend of $0.05 per share that is currently yielding 0.3% annually. While the two classes trade similarly, they don’t march lockstep and Peltz is sitting on a 20% gain on his Class A tranche, but has a 5.3% loss on the Class B stock. That undoubtedly also reflects the timing of when its shares were bought.

While there is no indication Peltz will be getting a board seat at U-Haul, its business looks ripe for a shake-up. While falling fiscal 2024 fourth-quarter sales and profits caused investors to pack up and move away from the stock in May, a similar report for the fiscal 2025 first quarter last month had them moving back in. Shares are up over 20% since the report.

The self-storage business is significantly cooler than it was two years ago, but revenue still rose in the latest period by 8.4% despite a 1.2% decrease in occupancy while the self-moving business ticked higher. It was the first time in eight quarters that segment revenue rose.

Solventum (SOLV)

One of the more popular stocks billionaire investors were buying in the second quarter was Solventum (NYSE:SOLV), the medical products business that was spun off from 3M (NYSE:MMM) earlier this year. Despite stumbling out of the gate after the separation, Solventum seems to have found its footing and has bounced nearly 50% higher off its low point. 

The company is one of the largest providers of sterilization devices, dressings, tapes, and other consumables used by healthcare facilities. Yet the biggest anchor weighing Solventum down is the $8.3 billion in long-term debt 3M hung around its neck. Management, though, says it is committed to paying down the debt over the next two years.

Solventum was Peltz biggest purchase in the quarter. He acquired almost 5.4 million shares worth $283.5 million at current prices. That implies a 13% gain for his average buy-in price of $61 a share. It is now Peltz’s fifth largest holding representing 7.5% of the portfolio.