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Trian Fund Management thinks GE will bring good things to its portfolio.
General Electric shares gained 4% today after news that the activist investor is taking a stake in the company.
In this case though, Peltz may not have much of a fight on his hands and it seems even he knows it. Peltz's Trian Fund Management bought into GE with its biggest bet ever, a $2.5 billion investment, but it has no plans to seek a board seat.
"We invested in GE because it is undervalued and underappreciated by the market despite what we believe is a transformation that will allow its world-class industrial businesses to drive attractive shareowner returns," Peltz said in a statement on Monday.
In other words: Peltz is saying that GE should just keep doing what it's doing, and the market will eventually see the value in this.
GE has been on a months-long campaign to exit its massive financial portfolio which made it part of regulators' Systemically Important Financial Institutions list that includes Wall Street's biggest banks. It's already sold off large pieces of this, like a real estate portfolio and other lending businesses.
General Electric has also already taken other steps that seem like they're right out of an activist's playbook The company announced a large buyback and it was quick to point this out in the wake of Trian's investment: "GE is focused on improving margins and returns, reducing costs and the size of corporate, returning capital to shareholders and realigning our portfolio, most recently with the announced exit of most of GE Capital," CEO Jeffrey Immelt said in an e-mailed statement.
The bet is that these moves will boost the company's stock. But Wall Street was already expecting this - Barclays, for example, already expected GE to fetch $33 a share by next year -- or about 22% more than it is trading at Monday.
Ed Garden, Trian's chief investment officer, said on CNBC that Trian is targeting a share price range of $40-$45 by the end of 2017, potentially setting the hedge fund up for a billion-dollar payday if GE CEO Jeffrey Immelt hits that target.
Of course Garden and Peltz will begin to speak more forcefully if GE starts to fall short of their hopes.
"They need to execute, and we're going to hold them accountable," Trian chief investment officer Ed Garden said on CNBC Monday morning.
Garden pointed out that General Electric shares are down since Immelt took over as CEO in 2001. Trian's announcement appeared to breathe new life into GE stock - because investors like the idea that someone will keep an eye on Immelt.
Also good for other shareholders: Even if he's being friendly now, if Immelt's plans don't pan out, Peltz won't be such a nice guy after all.