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Trian Partners co-founder and CEO Nelson Peltz explained to CNBC on Thursday the backstory to his firm’s position in struggling General Electric, breaking down what the hedge fund’s “big mistake” on the position was three years ago.
“We bought the stock at $23 … it went up to $32; we sold a third of our position,” Peltz told Jim Cramer at CNBC’s Delivering Alpha conference on Thursday.
“That was our big mistake; we should have sold three thirds of our position,” Peltz said.
GE’s stock has dropped over 70% since then, today trading near $9 a share. When the activist investor took a $2.5 billion stake in GE in 2015, Peltz said the company’s “disclosure was awful.” Cramer noted that Peltz “got suboptimal guidance” from GE’s management at the time, a sentiment Peltz echoed with a resounding “you think?”
But in past several years, GE has undergone multiple management changes. In the midst of these changes, Trian got a seat on GE’s board in 2017, installing Trian’s Ed Garden to push the company to make changes.
“We got rid of CEOs,” Peltz said about the changes at GE, adding that “the board is, except for one person, is 100% changed.”
Last year, GE appointed to CEO Larry Culp, the former Danaher CEO and a person who Peltz regards highly.
“I think Larry Culp is a star. I think he knows how to run a business. I think he knows how to deal with these issues,” Peltz said.
Peltz explained further, saying there’s “a very important point that many people miss” about GE’s appointment of Culp.
“You see companies in trouble and they parachute a star in and, he is a star, but he didn’t know all the problems as he was parachuting in. Larry was on the board roughly a year before he became CEO,” Peltz said. “So he was fully aware of the issues and then stepped in and took the job as CEO.”
“Larry is fantastic. He’s putting together a great management team. He’s got a stupendous board,” Peltz added.
As for Trian’s “big mistake” in not offloading its GE stake, Peltz gave his tongue-in-cheek reason why investors shouldn’t worry.
“We make a mistake about once every 25 years. So you guys can relax, for another 22 years everything’s going to be cool,” Peltz said.