Trian Fund Management, owned by activist investor Nelson Peltz, announced last week it has a more than 7 percent stake in industrial conglomerate Ingersoll-Rand. After the news broke, the stock jumped more than 5 percent.
Naturally, “Mad Money” host Jim Cramer wondered if any money can be made by piggybacking off of Peltz. To find out, he analyzed some of Peltz’s highest profile deals since his fund’s inception in November 2005. As it turns out, he found that piggybacking off of Peltz is a sound strategy indeed.
In his research, Cramer looked at what happened after Peltz’s firm took positions in Wendy’s , H.J.Heinz , Tiffany & Co. , Cadbury-Schweppes, Legg Mason , Family Dollar Stores and Kraft Foods . Cramer wasn’t interested measuring whether Peltz made money, though. He only wanted to find out if investors made money after buying into these stocks after Peltz’s positions became publicly available information.
As it turns out, investors who bought these seven stocks after Peltz disclosed his buys would have beat the market over the next month, 3 months, 6 months and 12 months on average. Even if an investor bought one of these stocks after the big spike that almost invariably comes when Peltz announces a substantial position, they would have enjoyed a gain of more than 10 percent on average after the first 3 months, beating the S&P 500 by an average of 7.4 percent.
To Cramer, the research suggests that it could be a good time to buy shares of Ingersoll-Rand, but only if you do your homework.
“Right now a bet on Ingersoll-Rand is really a bet on Nelson Peltz,” Cramer said. “Based on the past performance of companies where he’s taken a serious interest, that’s a bet I’m willing to take. As long as Peltz is working to bring out value, Ingersoll-Rand makes a ton of sense when the cloud lifts off the troubled industrial sector.”
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