Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that’s why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to smartest analysts and expensive data/information sources that individual investors can’t match. So should one consider investing in Philip Morris International Inc. (NYSE:PM)? The smart money sentiment can provide an answer to this question.
Is Philip Morris International Inc. (NYSE:PM) a buy, sell, or hold? Prominent investors were becoming less hopeful. The number of bullish hedge fund bets shrunk by 2 recently. Philip Morris International Inc. (NYSE:PM) was in 46 hedge funds’ portfolios at the end of June. The all time high for this statistic is 60. Our calculations also showed that PM isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings). There were 48 hedge funds in our database with PM holdings at the end of March.
In today’s marketplace there are plenty of formulas stock market investors can use to grade publicly traded companies. A duo of the most underrated formulas are hedge fund and insider trading sentiment. We have shown that, historically, those who follow the top picks of the best hedge fund managers can outpace the S&P 500 by a significant amount (see the details here). Also, our monthly newsletter’s portfolio of long stock picks returned 185.4% since March 2017 (through August 2021) and beat the S&P 500 Index by more than 79 percentage points. You can download a sample issue of this newsletter on our website .
Ken Heebner of Capital Growth Management
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Now we’re going to go over the latest hedge fund action surrounding Philip Morris International Inc. (NYSE:PM).
Do Hedge Funds Think PM Is A Good Stock To Buy Now?
At second quarter’s end, a total of 46 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -4% from the first quarter of 2020. The graph below displays the number of hedge funds with bullish position in PM over the last 24 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Philip Morris International Inc. (NYSE:PM) was held by Fundsmith LLP, which reported holding $1918.1 million worth of stock at the end of June. It was followed by GQG Partners with a $1164 million position. Other investors bullish on the company included Cedar Rock Capital, Gardner Russo & Gardner, and Ariel Investments. In terms of the portfolio weights assigned to each position Cedar Rock Capital allocated the biggest weight to Philip Morris International Inc. (NYSE:PM), around 19.27% of its 13F portfolio. Gardner Russo & Gardner is also relatively very bullish on the stock, setting aside 6.62 percent of its 13F equity portfolio to PM.
Due to the fact that Philip Morris International Inc. (NYSE:PM) has faced bearish sentiment from the aggregate hedge fund industry, logic holds that there exists a select few fund managers that decided to sell off their entire stakes last quarter. It’s worth mentioning that Paul Marshall and Ian Wace’s Marshall Wace LLP sold off the largest position of the “upper crust” of funds followed by Insider Monkey, comprising about $60 million in stock, and Steve Cohen’s Point72 Asset Management was right behind this move, as the fund cut about $25.6 million worth. These transactions are interesting, as aggregate hedge fund interest fell by 2 funds last quarter.
Let’s check out hedge fund activity in other stocks similar to Philip Morris International Inc. (NYSE:PM). These stocks are Royal Dutch Shell plc (NYSE:RDS), Unilever PLC (NYSE:UL), Honeywell International Inc. (NASDAQ:HON), Linde plc (NYSE:LIN), Bristol Myers Squibb Company (NYSE:BMY), Charter Communications, Inc. (NASDAQ:CHTR), and Citigroup Inc. (NYSE:C). All of these stocks’ market caps are closest to PM’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| RDS | 38 | 2444791 | 2 |
| UL | 19 | 844216 | -1 |
| HON | 57 | 1834599 | 1 |
| LIN | 55 | 5920316 | 12 |
| BMY | 73 | 5202516 | -8 |
| CHTR | 75 | 19486659 | 1 |
| C | 87 | 6155245 | -3 |
| Average | 57.7 | 5984049 | 0.6 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 57.7 hedge funds with bullish positions and the average amount invested in these stocks was $5984 million. That figure was $5974 million in PM’s case. Citigroup Inc. (NYSE:C) is the most popular stock in this table. On the other hand Unilever PLC (NYSE:UL) is the least popular one with only 19 bullish hedge fund positions. Philip Morris International Inc. (NYSE:PM) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for PM is 45.9. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 22.9% in 2021 through October 1st and surpassed the market again by 5.6 percentage points. Unfortunately PM wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); PM investors were disappointed as the stock returned -1.9% since the end of June (through 10/1) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2021.
Follow Philip Morris International Inc. (NYSE:PM)
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Disclosure: None. This article was originally published at Insider Monkey.
