Sachem Head Capital Management sharply cut back on its U.S. common stock portfolio in the second quarter.
The activist hedge fund firm, headed by Bill Ackman protégé Scott Ferguson, liquidated eight of the 12 stocks held in the portfolio at the end of the first quarter. It also initiated positions in two stocks.
As a result, Sachem Head now owns just six stocks in the portfolio, valued at $947 million on June 30. The U.S. stock portfolio was valued at $1.645 billion at the end of March.
The hedge fund firm declined to comment.
As in the case with other hedge funds, Sachem Head’s 13F portfolio provides a somewhat misleading snapshot of the firm’s overall portfolio, according to a person familiar with the matter. This individual said that at the end of June Sachem Head actually held about 20 positions, including derivatives and non-U.S. listed securities.
The 13F filings only include long positions in U.S. listed equities and related securities, including put and call options and convertible securities.
The filings do not include foreign listed securities or synthetic positions that can be created through the use of derivative contracts such as options, swaps and futures, according to a Goldman Sachs Group report analyzing 13F documents. “A hedge fund could offset a long position that we are able to monitor with a synthetic short position in options or futures on the underlying stock or an index of similar stocks that we currently are not able to monitor because the data on such trades and positions is not disclosed,” the bank said in the report.
Sachem Head posted a gain in the mid-teens in the first half of the year, according to a person familiar with the results.
By far its largest long position is Eagle Materials, accounting for nearly 36 percent of the common stock portfolio. In late March, Sachem Head disclosed it owned 9 percent of the building materials maker.
In May, Sachem Head nominated two directors to Eagle’s board, including Ferguson. The firm said in a letter to Eagle shareholders that it planned to propose a non-binding resolution at the 2019 annual meeting to declassify the board of directors.
Sachem Head’s Ferguson also called on the company to sell its core cement and wallboard businesses. “We believe that both the cement and wallboard businesses may have a range of attractive strategic alternatives that could provide more value to shareholders than a simple separation of these assets,” he said in the letter.
Eagle announced in April that it had begun a strategic review of its businesses and would expand its stock buyback program. By the end of May Eagle’s board capitulated, agreeing to spin off its heavy materials and light materials businesses into two publicly traded companies. The separation is expected to be completed in the first half of 2020.
In a May 30 announcement, Eagle also said it was actively pursuing alternatives for its oil and gas proppants business.
Shares of Eagle have risen about 10 percent since Sachem Head disclosed its activist stake in a document filed March 28 with the Securities and Exchange Commission.
Sachem Head’s second largest long bet in U.S. common stock is US Foods Holding Corp. Salesforce.com became the hedge fund’s third largest long position in common stock after it established a new position of 910,000 shares in the June quarter. In the first quarter, the firm liquidated its entire stake of 1.685 million shares of the cloud computing giant.
Sachem Head’s other three common stock positions are Russian internet company Yandex; Sea, a gaming and e-commerce platform in southeast Asia; and controversial utility PG&E Corp.
