Sachem Head Capital Management is well on its way to another very successful year.
According to a person who is familiar with the results, the activist hedge fund headed by Scott Ferguson was up more than 30 percent for the year through October, easily outperforming the market averages.
The strong performance follows last year’s 45.6 percent gain.
This year’s stellar results were heavily driven by the firm’s activist targets. In fact, the firm’s three largest positions — Elanco Medical Health and International Flavors and Fragrances, each representing nearly 22 percent of the portfolio, and Olin Corp., at more than 14 percent — together accounted for more than half of Sachem Head’s U.S. common stock assets at the end of the third quarter, according to the third-quarter 13F document that the firm filed on Friday.
Sachem Head initiated its stake in IFF — which is known for providing food and beverage scents and tastes — in the first quarter of this year, and the stock immediately became the hedge fund’s largest long at the time. It is not known what price Sachem Head paid for the shares. The stock is up 40 percent since its low in early January, when volume suddenly picked up, and up 32 percent from its next dip later that month, after which the stock took off again on sharply higher volume.
In early March, the company reached an agreement with Sachem Head under which Ferguson was to join the board between September 10, 2021 and December 31, 2021. That move has yet to happen.
Sachem Head owns nearly 6 percent of Elanco, having initiated its stake in the third quarter of 2020. The stock gained nearly 8 percent over the first 10 months of the year.
In December 2020, the animal health company reached a standstill agreement with Sachem Head and named Ferguson to its board of directors. Then, in March of this year, activist Starboard Value LP took a stake in Elanco and nominated three directors to the board, but then inexplicably withdrew its nominations later that month. Reuters reported at the time that Elanco did not make any concessions to Starboard.
Meanwhile, in March 2020, Ferguson joined the board of Olin, which makes specialty chemicals, including ammunition, chlorine, and vinyls. At the time, Sachem Head had launched a proxy fight and nominated four directors to the board, including Ferguson.
Sachem Head currently owns a little more than 7.4 percent of the company, after reducing its stake by 20 percent in the third quarter, according to its recent filing.
The stock surged more than 130 percent in the first 10 months of the year and has quadrupled since the end of February 2020.
Sachem Head disclosed its latest activist position on October 7, announcing that it had boosted its stake in US Foods Holding to 11.4 million shares, or more than 5.1 percent of the total outstanding. It also said it owned an additional 4.1 percent stake through physically settled swaps, giving the firm voting power over 9.2 percent of the shares.
In the filing, Sachem Head said the stock was undervalued and an attractive investment. It also said it may launch a proxy fight.
Sachem Head said it planned to hold discussions with the company, management, and board of directors, as well as other shareholders, on issues that may relate to the business, management, operations (including cost structure), assets, capitalization, financial condition, strategic plans, governance and board composition, and the future of the company.
In the third quarter, Sachem Head established a new stake in computer giant Dell Technologies, making it the fourth-largest long at the end of the third quarter, accounting for 6.4 percent of U.S. common stock assets, according to the latest 13F filing.
On November 1, Dell completed its spin-off of its 81 percent stake in VMware Inc. through a special dividend of Class A and Class B common stock to Dell’s shareholders.
In the third quarter, Sachem Head also more than tripled its stake in ride app Uber Technology.
Ferguson founded Sachem Head in 2012. Prior to that, he spent nine years at Bill Ackman’s Pershing Square Capital Management, where he was the firm’s first investment professional hired before the launch.
