4. Philip Morris International Inc. (NYSE:PM)
Number of Hedge Fund Holders: 47
PE Ratio: 16.60
Philip Morris International Inc. (NYSE:PM) makes and sells nicotine products. According to the latest securities filings, the investment firm led by Greenblatt owned 102,323 shares in the company at the end of the fourth quarter of 2021 worth $9.7 million, representing 0.31% of the portfolio. The investment firm increased its stake in the tobacco giant by 24% in the fourth quarter compared to filings for the previous quarter.
Philip Morris International Inc. (NYSE:PM) is a long-term holding of Greenblatt. It has been in the Gotham portfolio since late 2010. Back then, the stake had consisted of just 6,000 shares bought at an average price of $58.50 per share. The share price has almost doubled in the years since.
Among the hedge funds being tracked by Insider Monkey, London-based investment firm Fundsmith LLP is a leading shareholder in Philip Morris International Inc. (NYSE:PM) with 20 million shares worth more than $1.9 billion.
In its Q2 2021 investor letter, Broyhill Asset Management highlighted a few stocks and Philip Morris International Inc. (NYSE:PM) was one of them. Here is what the fund said:
“Philip Morris International Inc. (NYSE: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. Philip Morris International Inc. (NYSE: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 Philip Morris International Inc. (NYSE: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. Philip Morris International Inc. (NYSE:PM) 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.’”
