Investing

Billionaire Nelson Peltz Keeps Buying These 2 Stocks Hand Over Fist

Rich Duprey

Published: January 9, 2025 4:28 pm

Activist investor Nelson Peltz loves change. Seeking out undervalued and underperforming stocks, the billionaire often takes sizable positions in companies in a bid to unlock shareholder value via improvements in board representation, strategic overhauls, and operational efficiencies. To his credit, he focuses on long-term growth and profitability rather than short-term gains.

While looking for collaborative dialogues, he is not afraid to pick a fight with intransigent management. While he might not always emerge victorious, such as his proxy battle last year with Disney (NYSE:DIS), he has quite a few notches on his belt.

24/7 Wall St. Key Points:

• Nelson Peltz uses his Trian Fund Management hedge fund to find underperforming companies that still possess significant growth potential.
• Although the billionaire investor takes activist positions in companies, he seeks to work collaboratively with management to turnaround the business. Sometimes acrimonious proxy battles breakout.
• Peltz continued to build positions in two companies in the third quarter that have had lackluster performances over the past year.
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Peltz recently took an activist position in two new companies, acquiring large stakes in the second quarter in 3M (NYSE:MMM) spinoff Solventum (NYSE:SOLV) and U-Haul (NYSE:UHAL)(NYSE:UHAL-B), and then buying even more shares in the third. He now owns 7.1 million shares of the medical products company, or 4.13% of the shares outstanding, and almost 450,000 shares, or 2.29%, of the moving truck rental stock. He owns an additional 1.05 million shares, or 0.59%, of the Class B non-voting stock of U-Haul.

Peltz’ Trian Fund Management has $3.8 billion in assets under management in a concentrated portfolio of just nine companies. Solventum has become its fourth largest holding while U-Haul is its eighth-largest position. Let’s see what he finds attractive about both.

Solventum (SOLV)

Solventum is not exactly a household name, but was better known when it was 3M Health Care before it was spun off last April. Since its market debut, though, the stock has not fared well. Opening at $69.15 on Apr. 1, SOLV stock has essentially gone nowhere. It recently closed at $69.41 but had traded as low as $41 a share.

The stock represents a typical Peltz target. He actively seeks out underperforming companies with great potential, and looks to improve their operations by cutting costs, selling non-core businesses, and enhancing the value of their brands.

Solventum operates in four segments: medical surgical, dental solutions, health information systems, and purification and filtration. Bloomberg News reported “Trian believes Solventum has a significant value creation opportunity as a standalone public company” and is looking to help it reignite organic growth in the business, regrow profit margins, and sell off assets. Peltz foresees Solventum eventually paying a dividend.

Its recent third quarter earnings report was underwhelming, but may contain the fingerprints of Peltz’s influence. Sales of $2.08 billion were up just 0.4%, but operating margins collapsed to 13% from 24% a year ago. CEO Bryan Hanson said while the company is “clearly off to a solid start, it is not lost on us that revenue growth remains below market.” 

Solventum, though, is considering selling its filtration business as sales fell to $238 million in the segment, $10 million less than the previous quarter. Hanson said buying and selling parts of the company will be a key strategy for the company’s “transformation and turnaround.” But debt reduction might take a higher priority in the near-term.

U-Haul (UHAL)(UHAL-B)

U-Haul has also been a go-nowhere stock over the past year, for both share classes. The difference between the two 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.

The truck rental company is the largest consumer truck and trailer rental company in the world, but the market faces some headwinds, particularly from electric vehicle mandates. It is counting on the incoming Trump administration to turn that situation around. U-Haul’s storage business is also being challenged by a promotional environment, but it is remaining firm in its pricing.

Revenue in fiscal 2025 Q2 was essentially flat at $1.66 billion compared to $1.65 billion last year, but earnings of $187 million, or $0.96 per share, were down from $274 million, or $1.40 per share, last year.

U-Haul chairman Joe Schoen acknowledged Trian Fund Management’s investment in the company on the earnings conference call. While saying the hedge fund’s “reputation precedes them,” and they have had a single meeting with Trian’s representatives, U-Haul had no intention of acting on any advice received. “We have our business plans in place,” Schoen said. “There will not be any changes to our plans due to Trian’s input.”

Depending upon how well U-Haul performs with its organic growth plans, it could result in a messier relationship with Peltz.