At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Altria Group Inc (NYSE:MO).
Altria Group Inc (NYSE:MO) was in 46 hedge funds’ portfolios at the end of March. MO shareholders have witnessed a decrease in hedge fund interest of late. There were 54 hedge funds in our database with MO holdings at the end of the previous quarter. Our calculations also showed that MO isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 72% since March 2017 and outperformed the S&P 500 ETFs by more than 44 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Stephen Mandel of Lone Pine Capital
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, we are still not out of the woods in terms of the coronavirus pandemic. So, we checked out this successful trader’s “corona catalyst plays“. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we’re going to analyze the recent hedge fund action regarding Altria Group Inc (NYSE:MO).
How are hedge funds trading Altria Group Inc (NYSE:MO)?
At Q1’s end, a total of 46 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -15% from the fourth quarter of 2019. By comparison, 36 hedge funds held shares or bullish call options in MO a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to Insider Monkey’s hedge fund database, Ken Griffin’s Citadel Investment Group has the largest position in Altria Group Inc (NYSE:MO), worth close to $315.5 million, corresponding to 0.1% of its total 13F portfolio. The second largest stake is held by John Overdeck and David Siegel of Two Sigma Advisors, with a $125.8 million position; 0.5% of its 13F portfolio is allocated to the stock. Other professional money managers that hold long positions encompass Renaissance Technologies, Daniel S. Och’s OZ Management and William B. Gray’s Orbis Investment Management. In terms of the portfolio weights assigned to each position Callodine Capital Management allocated the biggest weight to Altria Group Inc (NYSE:MO), around 10.08% of its 13F portfolio. Clearline Capital is also relatively very bullish on the stock, earmarking 4.44 percent of its 13F equity portfolio to MO.
Because Altria Group Inc (NYSE:MO) has faced falling interest from the entirety of the hedge funds we track, logic holds that there lies a certain “tier” of hedge funds that slashed their positions entirely in the third quarter. Interestingly, Lone Pine Capital dropped the biggest position of all the hedgies followed by Insider Monkey, totaling about $176.5 million in stock, and Aaron Cowen’s Suvretta Capital Management was right behind this move, as the fund dumped about $142.8 million worth. These moves are interesting, as aggregate hedge fund interest dropped by 8 funds in the third quarter.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Altria Group Inc (NYSE:MO) but similarly valued. We will take a look at Mondelez International Inc (NASDAQ:MDLZ), HDFC Bank Limited (NYSE:HDB), General Electric Company (NYSE:GE), and American Express Company (NYSE:AXP). All of these stocks’ market caps are similar to MO’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| MDLZ | 54 | 2218156 | 4 |
| HDB | 38 | 1852582 | -1 |
| GE | 58 | 3531845 | -2 |
| AXP | 57 | 15414059 | -1 |
| Average | 51.75 | 5754161 | 0 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 51.75 hedge funds with bullish positions and the average amount invested in these stocks was $5754 million. That figure was $1440 million in MO’s case. General Electric Company (NYSE:GE) is the most popular stock in this table. On the other hand HDFC Bank Limited (NYSE:HDB) is the least popular one with only 38 bullish hedge fund positions. Altria Group Inc (NYSE:MO) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 7.9% in 2020 through May 22nd and surpassed the market by 15.6 percentage points. Unfortunately MO wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); MO investors were disappointed as the stock returned -2.4% during the second quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
Follow Altria Group Inc. (NYSE:MO)
Follow Altria Group Inc. (NYSE:MO)
Disclosure: None. This article was originally published at Insider Monkey.
