Shares of Dow component DuPont (NYSE: DD) are trading higher by 4.3% Wednesday on volume that is already more than double the daily average after activist investor Nelson Peltz urged the company to separate its agriculture business from its cyclical chemicals operations.
The news is having a modest, though positive impact on exchange traded funds with large stakes in Delaware-based DuPont with the Materials Select Sector SPDR (NYSEArca: XLB) trading higher by almost 0.8%. XLB, which features DuPont as its second-largest holding at a weight of 9.8%, is just pennies away from the all-time the ETF touched last month. [Materials ETF Soars to New Highs]
Peltz’s Trian Fund Management LP unveiled a stake in DuPont, now valued at $1.6 billion, in July 2013 at about the same time he first urged PepsiCo (NYSE: PEP) to consider splitting its beverages and snacks businesses while recommending what would be the new snacks company pursue an acquisition of Mondelez International (NasdaqGS: MDLZ). [Hedgie Helps Materials ETFs]
Peltz wants DuPont “to separate its agriculture, nutrition and health, and industrial biosciences divisions from units that generate strong cash flows but are more volatile,” report Swetha Gopinath and Kanika Sikka for Reuters.
The push to separate the agriculture and chemicals businesses, at least on the surface, makes sense as agribusiness stocks have badly lagged the broader market for several years. For example, the Market Vectors Agribusiness ETF (NYSEArca: MOO) is up just 2.3 over the past two years while the S&P 500 is higher by 36.6% over the same period. Only four ETFs have lost more than the $2.9 billion shed by MOO this year. DuPont is not a member of MOO’s lineup. [Investors Leave Agribusiness ETFs]