Erin Lash: After announcing a more than $3 billion ownership stake earlier this year, representing around 1 percent of shares outstanding, Nelson Peltz is now vying for a board seat at wide moat Proctor & Gamble. However, as we articulated in February, we think the firm is already taking prudent steps to right its ship, although we've long held that these efforts would take time to yield material improvement.
For one, P&G just closed the book on efforts to realign its brand portfolio, shedding more than 100 brands over the last few years, keeping a core 65. From our vantage point, these efforts stand to enhance its ability to focus its resources, both from a product innovation and marketing perspective on the highest return opportunities, ultimately aiding its brand intangible asset. Further, beyond bolstering its top-line prospects, P&G is also working to extract inefficiencies from its operations. However, we think that these efforts, rather than boosting profitability, ultimately stand to provide further fuel to reinvest behind its brands.
In light of all of the efforts that P&G is presently undergoing, we see little to suggest that Nelson Peltz's oversight stands to accelerate material change at the organization. However, with shares trading at a discount to our valuation, we'd suggest investors interested in the space keep wide moat Proctor & Gamble on their radar screens.