Third Point Nestle Stake

Third Point’s involvement in Nestle (NSRGY) creates a highly intriguing, catalytic, low-risk investment opportunity in a name that was otherwise (likely) destined for moribund operational and stock price performance. As outlined in its letter to investors, Third Point calls out portfolio rationalization, margin improvement and capital structure optimization as means of driving CHF 5.50 EPS by 2020. Divided by the current USD/CHF .9632 exchange rate, and multiplied by a 22.5x terminal PE, gives a FYE19 target price of $128.48 and a price-only return of 47.5% from the current $87.12 PPS. 

Given the near-term activist fluff in the stock, there will more than likely be a chance to buy perhaps 10% lower, or a bit below $80. 

The two most intriguing factors, IMO, are the margin improvement (see graphic below) and involvement of packaged goods expert Jan Bennink. 


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