2. Philip Morris International Inc. (NYSE:PM)
Cedar Rock Capital’s Stake Value: $846,421,000
Percentage of Cedar Rock Capital’s 13F Portfolio: 19.26%
Number of Hedge Fund Holders: 46
Philip Morris International Inc. (NYSE:PM) is one of the leading American tobacco companies, with recognized cigarette brands like Marlboro, Benson & Hedges, Bond Street, and Lark, among others. Philip Morris International Inc. (NYSE:PM)’s products are distributed across 180 markets worldwide to over 150 million consumers. Philip Morris International Inc. (NYSE:PM) is making a shift towards sustainability, and is working on introducing smoke-free products to replace tobacco products, which would be a healthier and less dangerous choice for consumers. Philip Morris International Inc. (NYSE:PM) is a top stock in Andy Brown’s investment portfolio.
Cedar Rock Capital owns 8.54 billion shares in Philip Morris International Inc. (NYSE:PM), valued at $846.42 million, making up 19.26% of the firm’s Q2 portfolio.
On October 19, Philip Morris International Inc. (NYSE:PM) reported an EPS for Q3 of $1.58, beating estimates by $0.02. The revenue stood at $8.12 billion, exceeding estimates by $175.15 million.
As of the end of June, out of the 873 hedge funds tracked by Insider Monkey, 46 were long Philip Morris International Inc. (NYSE:PM), down from 48 in Q1.
Here is what Broyhill Asset Management has to say about Philip Morris International Inc. (NYSE:PM) in its Q2 2021 investor letter:
“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.’”
