The extreme volatility experienced by the broader market during the first three months of 2016 forced several hedge funds to reshuffle their portfolios. While some funds used that volatility to go on a buying spree, others took it as a sign of major turmoil in the future and reduced their exposure to US equities. One of the hedge funds that seems to have chosen the latter course of action is Sir Michael Hintze‘s CQS Cayman LP. According to the latest 13F filing submitted by CQS Cayman LP with the Securities and Exchange Commission (SEC), its US equity portfolio saw a quarterly turnover of 87.88% during the first quarter and was worth almost $1 billion at the end of March, down by 31% on the quarter. The filing also revealed that while the fund reduced its stake in 30 stocks and sold its entire positions in 60 companies during the first quarter, it made comparatively less buying decisions during that period by initiating 27 new positions and raising its exposure to 22 companies. Taking into account that the fund was less bullish on US equities while entering the second quarter than it was at the beginning of 2016, in this post, we will look at its top five equity holdings and try to gauge what makes CQS Cayman still bet on them.
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#5 Zoetis Inc (NYSE:ZTS)
– Shares held by CQS Cayman LP (as of March 31): 525,000
– Value of Holding (as of March 31): $4.17 million
Let’s start with Zoetis Inc (NYSE:ZTS), in which CQS Cayman LP boosted its stake by 103% during the first quarter. The manufacturer of animal health medicines and vaccines has emerged as one of the most stable pharmaceutical stocks amid a slump in the sector this year with its stock currently trading down marginally (by 2%) for the year. On May 4, Zoetis Inc (NYSE:ZTS) reported its fiscal 2016 first quarter earnings, declaring EPS of $0.48 on revenue of $1.20 billion versus analysts’ expectations of EPS of $0.41 on revenue of $1.10 billion. Following the earnings release, on May 6, analysts at Goldman Sachs downgraded the stock to a ‘Sell’ from ‘Neutral’, but upped their price target on it to $48 from $46, which is very close to the level where the stock is trading currently. Investors that initiated a stake in Zoetis Inc during the first quarter included First Eagle Investment Management, which purchased 2.8 million shares of the company.