Citadel Investment Group’s Biggest Q1 Moves Highlight Reduced Exposure To U.S Equities

One of the largest alternative asset management firms in the world, billionaire Ken Griffin‘s Citadel Investment Group has been quietly reducing its exposure to U.S equities since the second half of 2015. The latest 13F filing submitted with the Securities and Exchange Commission by the fund reveals that its U.S equity portfolio was worth $79.25 billion at the end of the first quarter of 2016, making it the third quarter in a row in which the value of the fund’s U.S equity portfolio has declined, after peaking at $115.30 billion at the end of June of last year. Officially founded by Mr. Griffin on November 1, 1990, Citadel Investment Group has grown on to become one of the largest hedge funds in the world over the last 25 years, with regulatory assets under management totaling around $150 billion as of March 30, 2016. Due to its humongous size , Citadel holds positions in thousands of stocks at any given point, which makes it difficult for anyone to identify the major moves made by the fund during a quarter. However, we at Insider Monkey regularly scan Citadel’s equity portfolio in order to extract that information and share it with our readers. Having said that, in this post, we are going to reveal and discuss the five most notable moves made by Citadel Investment Group during the first quarter of 2016.

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New Additions

Mastercard Inc (NYSE:MA)

– Shares Owned by Citadel Investment Group (as of March 31): 547,694

– Value of Holding (as of March 31): $51.76 million

Let’s start with Mastercard Inc (NYSE:MA), in which Citadel Investment Group re-initiated a stake during the first quarter, after selling off its entire holding in the company during the final quarter of 2015. Shares of the payment processing giant started 2016 on a dismal note, but due to the rally they have seen since mid-February they are currently trading down by 3.5% year-to-date. In spite of the upward momentum, some analysts believe that trading at 23.03-times forward earnings means that Mastercard Inc (NYSE:MA)’s stock is overvalued and that it will be extremely difficult for it to break above the $100 mark in the short-term. For the first quarter, the company reported EPS of $0.86 on revenue of $2.45 billion, topping analysts’ estimates of EPS of $0.85 on revenue of $2.38 billion. A hedge fund that reduced its stake in Mastercard during the first quarter was Doug Silverman and Alexander Klabin’s Senator Investment Group, which cut its holding by one-fourth to 1.5 million shares.

Twenty-First Century Fox Inc (NASDAQ:FOXA)

– Shares Owned by Citadel Investment Group (as of March 31): 3.74 million

– Value of Holding (as of March 31): $104.32 million

Twenty-First Century Fox Inc (NASDAQ:FOXA) was another large new addition to Citadel Investment Group’s equity portfolio during the first quarter. Though Twenty-First Century Fox Inc (NASDAQ:FOXA)’s stock has appreciated by over 6% so far this year, it is still trading down more than 25% from the highs that it hit in late-2014. On May 4, the company reported its first quarter results, which were largely in-line with analysts’ projections. Following the earnings release, analysts at Pacific Crest reiterated their ‘Overweight’ rating on the stock on May 5, while upping their price target on it to $37 from $34, which represents potential upside of 25.6%. Billionaire Dan Loeb’s Third Point also initiated a stake in the media and entertainment company during the first quarter, purchasing 1.45 million shares.

We’ll look at three large positions that Citadel sold out of during the first quarter on the next page.

No Longer in Citadel’s Portfolio

Ford Motor Company (NYSE:F)

Citadel Investment Group held 2.95 million shares of Ford Motor Company (NYSE:F) worth $41.58 million at the end of 2015, a holding which was sold off during the first quarter. Over the past three months, Ford Motor Company (NYSE:F)’s stock has managed to recover some of the losses that it suffered earlier in the year, but it is finding it extremely hard to break above its support-turned-resistance level of $14. Though the stock, trading at a trailing P/E of 5.94 and sporting an annual dividend yield of 4.54%, is currently considered to be cheap by many investors, others feel that it is reasonably valued at current levels given the potential for earnings contraction going forward. On May 12, shareholders of the company voted against a proposal that sought to change the class structure of the stock, which would’ve given members of the Ford family voting control of the company. David Harding‘s Winton Capital Management upped its position in Ford by 32% to 5.36 million shares during the first quarter.

Thermo Fisher Scientific Inc. (NYSE:TMO)

At the end of December, Citadel held 780,000 shares of Thermo Fisher Scientific Inc. (NYSE:TMO) worth $110.64 million, a position which it discarded during the first quarter. After ending the first quarter on a flat note, shares of Thermo Fisher have been rising steadily in the second quarter. They recently made their lifetime high of $149.95 and are currently trading up by 4.21% year-to-date. Speaking at the Ira Sohn Conference on May 4, Glenview Capital’s Larry Robbins mentioned that he continues to be bullish on Thermo Fisher, which is one of the reasons why the stock has appreciated considerably in the last few days. Furthermore, analysts at Bank of America reiterated their ‘Buy’ rating and $163 price target on the stock on May 11. Ric Dillon‘s Diamond Hill Capital initiated a stake in Thermo Fisher Scientific Inc. (NYSE:TMO) during the first quarter by purchasing 590,922 shares of the company.

Zoetis Inc (NYSE:ZTS)

Selling its entire stake of 3.03 million shares of Zoetis Inc (NYSE:ZTS), which were worth $145.37 million at the end of 2015, was one of the most interesting moves made by Citadel Investment Group during the first quarter. Bill Ackman of Pershing Square recently sold a large chunk of his Zoetis holding as well, amounting to a sale of about 16.85 million shares. However, Mr. Ackman’s firm expressed continued confidence in the company in its recent letter to investors, to the point that Pershing Square’s Bill Doyle will not stand for re-election to the company’s board. On May 4, Zoetis reported its first quarter earnings, declaring EPS of $0.48 on revenue of $1.20 billion, which solidly eclipsed analysts’ estimates of EPS of $0.41 on revenue of $1.10 billion. William Von Mueffling’s Cantillon Capital Management increased its stake in Zoetis Inc (NYSE:ZTS) by 173% to 6.14 million shares during the first quarter.

Disclosure: None