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The Morning Brief: Trian Launches Proxy Fight with Procter & Gamble

The activist firm headed by Nelson Peltz says the packaged goods giant has underperformed its peers and the market.

Trian Fund Management has launched a proxy fight with Procter & Gamble, its largest activist battle ever. The hedge fund firm, which has a roughly $3.3 billion stake in the packaged goods giant through its hedge funds and special purpose vehicles, said in a regulatory filing that it’s nominating Trian Chief Executive Officer Nelson Peltz to the board of directors at the 2017 annual meeting. In its filing, Trian says P&G has underperformed its peers and the market, and that the company has lost market share. “Although P&G has stated that it has identified up to $13 billion of additional cost savings, given the company’s track record, Trian is concerned that this initiative will be as ineffective as the 2012 program in driving sales growth, earnings growth and shareholder value creation,” the activist said in the filing. “Trian believes that Mr. Peltz’s significant expertise and long track record of working successfully with management teams and boards to turn around consumer companies and drive sustainable long-term shareholder value will be invaluable to P&G as it works to overcome its challenges.”

At least one analyst who follows the stock is skeptical that Trian could sharply boost shareholder value. In a Monday afternoon note sent to clients, Morgan Stanley said it retained its equal weight rating, explaining, “We do not see game-changing news, and remain skeptical that PG’s topline trends will turn.”
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Morgan Stanley raised its price target on hedge fund favorite Apple to $182 from $177, noting that its estimate for fiscal year 2018 is 11 percent above the consensus. However, it does have some short-term concerns. “We expect Apple to report an in-line June quarter and provide a weaker than consensus September outlook on the back of a slightly later iPhone launch than typical (October shipment launch instead of September),” the investment bank said. However, the delay drives its fiscal 2018 estimates higher, the firm added, “and creates a dynamic of much better than normal December and March quarter seasonality, providing an attractive set-up for the stock as we move past the September guide.” Apple was the fifth most widely held stock among hedge funds at the end of the first quarter, the last period for which this data is available. Its stock rose 0.35 percent to close at $149.56.

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Credit Suisse Group raised its price target on Microsoft to $84, from $80, ahead of its quarterly earnings report scheduled for July 20. “Our recent enterprise software survey suggests that demand for Azure could be at a positive inflection point,” the bank said in a note to clients, referring to the company’s cloud computer platform. It also points out that in a new Credit Suisse survey Microsoft saw the largest improvement among all cloud vendors, adding that 40 percent of respondents indicated Azure was their preferred cloud vendor. Shares of Microsoft, the sixth most popular hedge fund stock, rose nearly 1 percent to close at $73.35.







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