When Trian Partners, the activist hedge fund run by Nelson Peltz, disclosed that it had taken a giant position in General Electric, Jim Cramer was intrigued. In fact, when Cramer was doing research for his last book he found that Peltz was the only activist investor who consistently beat the market if investors piggybacked after he had disclosed that he had taken a position.
Many activist money managers can beat the market, but they are only required to disclose holdings once a quarter. That means investors will almost always end up paying a higher price for the same stock, because the stocks will tend to spike once the news breaks.
"But Nelson Peltz is so talented at convincing companies to unlock value that it is often worth buying his favorite holdings, even if you have to buy into the spike that almost always comes with his announcement of a hefty new position," the "Mad Money" host said.
So, Cramer was excited a week and a half ago when Trian Partners announced it had become one of the 10 largest shareholders in General Electric and said the stock was undervalued and underappreciated and predicted it could travel as high as $45 in 2017.
However, just because Peltz has a good track record doesn't mean Cramer thinks investors should buy the stock. So, Cramer did his own homework, and when he did the research he found it easy to understand why Peltz had a bullish long-term view about GE.