In this article, we discuss the 5 European stocks to buy according to Tom Russo’s hedge fund. If you want to read our detailed analysis of Russo’s history, investment philosophy, and hedge fund performance, go directly to the 10 European Stocks to Buy According to Tom Russo’s Hedge Fund.
5. Heineken N.V. (XAMS:HEIA.AS)
Russo’s Stake Value: $745,179,000
Percentage of Russo’s 13F Portfolio: 6.29%
Number of Hedge Fund Holders: –
The fifth stock on our list of the 5 European stocks to buy according to Tom Russo’s hedge fund is Heineken N.V. (XAMS:HEIA.AS), which is a multinational brewing company headquartered in Amsterdam. The company has more than 150 breweries across 70 countries, and is the second largest brewery worldwide, after Anheuser-Busch InBev SA/NV (NYSE: BUD). The Dutch beverage giant, Heineken N.V. (XAMS:HEIA.AS), has 348 beer and cider brands under its domain, which are served both locally and internationally. The company has a market capitalization of $60.22 billion.
Russo’s hedge fund owns 7.39 million shares in Heineken N.V. (XAMS:HEIA.AS), amounting to $745.1 million, and making up 6.29% of Russo’s 13F portfolio.
The company reported earnings per share for 2020 as -$0.42, which was a major step down as compared to the EPS last year at $4.37. Heineken N.V. (XAMS:HEIA.AS) suffered a major financial setback from forced lockdowns due to the COVID-19 pandemic, so it increased investments to diversify its portfolio. On August 30, it was reported that the company would invest £38 million in its Star Pubs & Bars by the end of 2021, which would create more than 500 jobs and benefit 700 pubs under the company’s domain. They plan to establish new outlets near residential areas since many people now work from home as a result of the COVID-19 pandemic, which has increased the foot traffic in neighborhood drinking joints.
4. Pernod Ricard SA (OTC:PDRDY)
Russo’s Stake Value: $753,161,000
Percentage of Russo’s 13F Portfolio: 6.36%
Number of Hedge Fund Holders: 1
The fourth stock on our list of the 5 European stocks to buy according to Tom Russo’s hedge fund is Pernod Ricard SA (OTC:PDRDY), which is a French alcoholic beverage mega company. The company is named after its two most popular products – Pernod Anise and Ricard Pastis.
Pernod Ricard is known for pastis, which are anise-flavored spirits – commonly consumed in France. Headquartered in Paris, the company’s global footprint expands to Europe, Middle East, Africa, Asia & Pacific, and the Americas. Pernod Ricard SA (OTC:PDRDY) has a market capitalization of $57.75 billion.
Russo’s hedge fund owns 3.39 million shares in Pernod Ricard SA (OTC:PDRDY), amounting to $753.1 million, and making up 6.36% of Russo’s 13F portfolio.
According to a press release on September 21, Pernod Ricard SA (OTC:PDRDY) will acquire The Whiskey Exchange, which is an online and physical retailer of spirits in the UK. The Whiskey Exchange is a leading e-commerce spirits retailer with 10,000 products under the brand name. This strategic acquisition is in line with Pernod Ricard’s strategy to enter the e-commerce consumer market, and meet the demand for unique and premium blends.
3. Compagnie Financière Richemont SA (OTC:CFRUY)
Russo’s Stake Value: $778,072,000
Percentage of Russo’s 13F Portfolio: 6.57%
Number of Hedge Fund Holders: 2
The third stock on our list of the 5 European stocks to buy according to Tom Russo’s hedge fund is Compagnie Financière Richemont SA (OTC:CFRUY), which is a Swiss luxury goods company headquartered in Bellevue, Switzerland. Founded in 1988, Compagnie Financière Richemont SA (OTC:CFRUY) specializes in luxury products such as jewelry, leather goods, watches, firearms, accessories, and more. The flagship brands owned by Compagnie Financière Richemont SA (OTC:CFRUY) include Cartier, Chloé, Dunhill, Montblanc, and Baume & Mercier among others. The company has a market cap of $60.29 billion.
Russo’s hedge fund owns about 6.4 million shares in Compagnie Financière Richemont SA (OTC:CFRUY), amounting to $778 million, and making up 6.57% of Russo’s 13F portfolio.
At the end of the second quarter of 2021, 2 hedge funds in Insider Monkey’s database held stakes amounting to $227.3 million in Compagnie Financière Richemont SA (OTC:CFRUY). This is compared to the same number of hedge funds in the previous quarter, with stakes worth $181.6 million.
On September 23, the board of Compagnie Financière Richemont SA (OTC:CFRUY) announced that the dividend would be raised to $2.15, which means the dividend yield would increase by 1.9% – a statement that satisfied the shareholders immensely.
2. Philip Morris International Inc. (NYSE:PM)
Russo’s Stake Value: $783,039,000
Percentage of Russo’s 13F Portfolio: 6.61%
Number of Hedge Fund Holders: 46
The second stock on our list of the 5 European stocks to buy according to Tom Russo’s hedge fund is Philip Morris International Inc. (NYSE:PM), which is a multinational Swiss-American tobacco and cigarette manufacturer. Philip Morris International Inc. (NYSE:PM) is headquartered in Lausanne, Switzerland, and was founded originally in 1847. It is one of the companies that make up Big Tobacco, along with tobacco giants like Altria Group, Inc. (NYSE:MO), British American Tobacco p.l.c. (NYSE:BTI), Imperial Brands PLC (OTC:IMBBY), and Japan Tobacco Inc. (OTC:JAPAY). The flagship brand under Philip Morris International Inc. (NYSE:PM) is Marlboro, which is a cigarette brand consumed worldwide. The company is a long-term sponsor of the Formula One team Scuderia Ferrari.
Philip Morris International Inc. (NYSE:PM) has a market capitalization of $149.75 billion. It is also traded as a S&P 100 and S&P 500 component.
Russo’s hedge fund owns 7.9 million shares in Philip Morris International Inc. (NYSE:PM), amounting to $783 million and making up 6.61% of Russo’s 13F portfolio.
At the end of the second quarter of 2021, 46 hedge funds in Insider Monkey’s database held stakes amounting to $5.97 billion in Philip Morris International Inc. (NYSE:PM), up from 48 in the previous quarter with stakes worth $5.49 billion.
The company reported last quarter’s earnings per share of $1.57 on July 20, beating analysts’ consensus estimates of $1.55 by $0.02. The actual revenue for Philip Morris International Inc. (NYSE:PM) was $7.59 billion, missing analysts’ estimates by $114.07 million.
On August 19, Deutsche Bank maintained a Buy rating on Philip Morris International Inc. (NYSE:PM), raising the price target to $111.32 from $96.08.
Out of the hedge funds tracked by Insider Monkey, London-based Fundsmith LLP is the leading shareholder in Philip Morris International Inc. (NYSE:PM), with over 19.3 million shares worth $1.91 billion.
Broyhill Asset Management, in its Q2 2021 investor letter, mentioned that Philip Morris International Inc. (NYSE:PM) shook off the prospects of a ban on menthol and a potential cap on nicotine. Here is what the fund said:
“Philip Morris (PM) shook off the prospects of a ban on menthol and a potential cap on nicotine and gained 23%. We shared our thoughts on these regulations during the quarter, which are available here.
‘PM Valuation. PM is up ~ 15% YTD and would have the most to gain under a nicotine cap. A cap would likely accelerate conversion to iQOS, which is 100% incremental for PM (PM also has zero exposure to combustible cigarettes in the U.S. and licenses its IQOS product for MO to distribute domestically). As such, the decline in PM was much more muted, with the stock hitting new 52 week highs a day after the Biden headline, driven by yesterday’s earnings release. It didn’t take long for investors to shift their attention back to fundamentals and the fundamentals here are best in class. In short, results beat estimates across the board (a recurring theme here), and management raised guidance for the full year (another recurring theme). IQOS continued to deliver impressive growth, recording continued market share gains on the heels of continued user acquisition growth, up 1.5M to 19.1M total users. Importantly, IQOS now represents nearly 30% of PM net revenues (management expects “smoke-free” products to represent more than half of their business by 2025, which should make the ESG folks happy), which is driving top-line growth and margin expansion. Hard to believe that they have created a product with higher margins than combustible cigarettes!! We expect PM operating margins to increase by 100bps – 200bps annually as IQOS continues to gain share. The stock trades at ~ 15x today or 2/3 of the market’s multiple for a business likely to generate $35B in cash flow – or 25% of the market cap – in just the next three years. Over the last decade, shares have traded at an average multiple of 18x and within a range of ~ 14x – 22x (+/-1 standard deviation). The stock yields 5.1% at the current price, and we expect management to resume share purchases in the back half of this year.’”
1. Nestlé S.A. (OTC:NSRGY)
Russo’s Stake Value: $1,219,960,000
Percentage of Russo’s 13F Portfolio: 10.3%
Number of Hedge Fund Holders: 4
The stock ranking first on our list of the 5 European stocks to buy according to Tom Russo’s hedge fund is Nestlé S.A. (OTC:NSRGY), which is a Swiss multinational food and beverage megacorporation, headquartered in Vevey, Switzerland. It has remained the largest food company worldwide since 2014 by revenue. Nestlé S.A. (OTC:NSRGY) products include breakfast cereals, bottled water, baby formula, snacks, juices, and coffee, among others. The famous brands under Nestlé S.A. (OTC:NSRGY) are Nespresso, Nescafé, Kit Kat, Nesquik, Maggi, and more. The company is also a major shareholder in L’Oréal S.A. (OTC:LRLCY). Founded in 1866, Nestlé S.A. (OTC:NSRGY) products have become consumer staples worldwide, with 180 countries being served by the food and beverage conglomerate. Nestlé S.A. (OTC:NSRGY) has a market cap of $331.4 billion.
Russo’s hedge fund owns 9.78 million shares in Nestlé S.A. (OTC:NSRGY), amounting to $1.21 billion, and making up 10.3% of Russo’s 13F portfolio.
At the end of the second quarter of 2021, 4 hedge funds in Insider Monkey’s database held stakes amounting to $1.82 billion in Nestlé S.A. (OTC:NSRGY). This is compared to the same number of hedge funds in the previous quarter, with stakes worth $1.64 billion.
On October 1, analysts maintained an Overweight rating on Nestlé S.A. (OTC:NSRGY), raising the price target to $142.5 from $120.49. Out of the hedge funds tracked by Insider Monkey, Russo’s Gardner Russo & Gardner is the leading shareholder in Nestlé S.A. (OTC:NSRGY).
Semper Vic Partners, in its Q2 2021 investor letter, mentioned that Nestlé S.A. (OTC:NSRGY)’s shares are well-positioned in its portfolios based on the company’s global growth potential. Here is what the fund said:
“I believe that Nestlé shares are well-positioned in our portfolios based on its global growth potential. Nestlé’s global growth potential is a dividend from their trusted consumer brands’ 100-year command presence in over 100 countries. Over these years, Nestlé has developed trusted and cherished iconic brands. For instance, Nestlé has over 30 brands that have over $1 billion of annual turnover. Nestlé benefits from a vast Total Addressable Market (TAM)
available through developing and emerging market consumers shifting from subsistence economies to the introduction of market-based economies. Nestlé benefits from its market leadership in two key categories that evidence extremely high brand loyalty – global pet food/care and global premium coffee (led by Nestlé’s globally leading Nespresso)…” (Click here to see the full text)
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