4. Philip Morris International Inc. (NYSE:PM)
Ariel Investments’ Stake Value: $344,868,000
Percentage of Ariel Investments’ 13F Portfolio: 3.05%
Number of Hedge Fund Holders: 55
Philip Morris International Inc. (NYSE:PM) is a holding corporation that produces and sells cigarettes, tobacco, and nicotine-based products. Philip Morris International Inc. (NYSE:PM) is the fourth-largest holding in the first quarter portfolio of John Rogers’ Ariel Investments. The hedge fund owned 3.67 million shares of Philip Morris International Inc. (NYSE:PM) in Q1 2022, worth $344.87 million, representing 3.05% of the total 13F portfolio.
At the end of Q1 2022, 55 hedge funds monitored by Insider Monkey were long Philip Morris International Inc. (NYSE:PM), up from 47 firms the previous quarter. The total stakes owned in the first quarter amounted to more than $6.64 billion, compared to $6.20 billion in the last quarter.
GQG Partners is Philip Morris International Inc. (NYSE:PM)’s largest shareholder, with shares worth $2.81 billion. On April 24, BofA analyst Lisa Lewandowski boosted her price objective on Philip Morris International Inc. (NYSE:PM) to $117 from $107 and retained a Buy rating on the stock. Despite the concerns, Philip Morris International Inc. (NYSE:PM) will shift its focus to other high-potential industries in 2022, according to the analyst, while coping with the temporary cost constraints of transferring manufacturing away from Russia.
Broyhill Asset Management mentioned Philip Morris International Inc. (NYSE:PM) in its Q2 2021 investor letter. Here is what the firm 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.’”
