Morgan Stanley Global Franchise Portfolio Exits Zoetis Entirely as Fund Pivots Away from Animal Health Exposure

Morgan Stanley’s Global Franchise Portfolio sold its entire 298,428-share Zoetis position in Q2 2026, marking one of the most significant institutional exits from the world’s largest animal health company this year — a move that adds to growing evidence of institutional reassessment of Zoetis’s near-term investment case amid sustained companion animal headwinds and a series of earnings disappointments.

Morgan Stanley’s Global Franchise Portfolio, a fund that targets businesses with durable returns on capital, recurring revenue and strong free cash generation, has exited its Zoetis position entirely, according to its latest N-PORT filing with the SEC. The fund sold all 298,428 shares during the second quarter of 2026, making Zoetis the most significant portfolio departure of the period.

The exit is notable both for its scale and its context. Zoetis has faced a difficult 2026, with Q1 and Q2 results missing consensus expectations on revenue, companion animal sales declining in the US, and full-year guidance cut materially from $9.68–$9.96 billion to $9.12–$9.32 billion. The stock has traded near its 52-week low of $72.38, falling from a 12-month high of $172.23 — a decline of approximately 56% — while multiple securities class actions are now progressing toward a July 27 lead plaintiff deadline.

The Morgan Stanley fund simultaneously exited Arthur J. Gallagher and made new purchases in McKesson, Schneider Electric and Hermès, reflecting a rotation toward established global franchises in healthcare distribution, industrial technology and luxury goods.

Existing positions in Coca-Cola and Microsoft were both trimmed by approximately a third, consistent with the fund’s discipline of taking profits when valuations outpace fundamentals.
By quarter-end, the 34-stock portfolio was led by Alphabet, Taiwan Semiconductor, Visa, Microsoft and Coca-Cola — with no remaining animal health exposure following the Zoetis disposal.