Sachem Head Capital’s New Bet on CVS Health Amid Stock Price Decline Sparks Speculation of Activist Investor Moves

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Sachem Head Capital Management, an investment firm led by Scott Ferguson, made a significant move in the second quarter of 2024 by acquiring a new stake in CVS Health Corp (CVS.N). This acquisition came at a time when the healthcare giant’s stock price had seen a notable decline of approximately 25%, making it an intriguing investment opportunity. According to a regulatory filing made on Wednesday, Sachem Head now holds 2.45 million shares of CVS, which accounts for 0.20% of the company as of June 30, 2024.

The firm’s decision to invest in CVS Health has garnered attention, especially as the stock has struggled throughout the year, experiencing a 31% drop since January. In contrast, the broader market has seen a 15% rise during the same period. This disparity has led to growing speculation among fund managers that an activist investor may step in to urge CVS to implement strategic changes that could help boost its share price.

Sachem Head Capital, known for its successful proxy fight with US Foods Holding Corp two years ago, has not yet disclosed its specific intentions regarding its investment in CVS Health. A representative from the firm declined to comment on their plans. However, the size of this investment places it among the hedge fund’s largest holdings, alongside other significant investments in companies like ZoomInfo Technologies (ZI.O) and Twilio (TWLO.N).

In addition to its new stake in CVS Health, Sachem Head made adjustments to its portfolio during the second quarter. Notably, the firm reduced its holding in US Foods by nearly 30%, though it remained the firm’s largest U.S. investment as of June 30, with 9.7 million shares, representing a 4% stake. In a new filing this week, Sachem Head revealed a further reduction in its US Foods investment to approximately 5 million shares, now a 2% stake in the company.

Investment managers like Sachem Head are required to disclose their holdings in U.S. companies at the end of each quarter through what is known as a 13F filing. While these filings provide a backward-looking view, they are closely watched by other investors for potential trends and insights into which companies might be the next targets for activist investors.

As speculation continues to mount, all eyes will be on how Sachem Head Capital Management maneuvers its new investment in CVS Health and whether it will lead to any significant changes in the company’s strategic direction.