Will the new coronavirus cause a recession in US in the next 6 months? On February 27th, we put the probability at 75% 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).
Is Altria Group Inc (NYSE:MO) worth your attention right now? The smart money is getting more optimistic. The number of bullish hedge fund positions increased by 1 in recent months. Our calculations also showed that MO isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video below for Q3 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
In today’s marketplace there are plenty of signals investors employ to value stocks. Some of the most innovative signals 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 beat the market by a significant margin (see the details here).
Stephen Mandel of Lone Pine Capital
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. In January, we recommended a long position in one of the most shorted stocks in the market, and that stock returned more than 50% despite the large losses in the market since our recommendation. Keeping this in mind let’s go over the key hedge fund action surrounding Altria Group Inc (NYSE:MO).
What have hedge funds been doing with Altria Group Inc (NYSE:MO)?
Heading into the first quarter of 2020, a total of 54 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 2% from the third quarter of 2019. Below, you can check out the change in hedge fund sentiment towards MO over the last 18 quarters. With hedgies’ capital changing hands, there exists a select group of noteworthy hedge fund managers who were upping their stakes considerably (or already accumulated large positions).
More specifically, Lone Pine Capital was the largest shareholder of Altria Group Inc (NYSE:MO), with a stake worth $176.5 million reported as of the end of September. Trailing Lone Pine Capital was Citadel Investment Group, which amassed a stake valued at $172.1 million. Millennium Management, Suvretta Capital Management, and Orbis Investment Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Callodine Capital Management allocated the biggest weight to Altria Group Inc (NYSE:MO), around 8.7% of its 13F portfolio. Kehrs Ridge Capital is also relatively very bullish on the stock, earmarking 6.07 percent of its 13F equity portfolio to MO.
As one would reasonably expect, key hedge funds have been driving this bullishness. Lone Pine Capital, assembled the most outsized position in Altria Group Inc (NYSE:MO). Lone Pine Capital had $176.5 million invested in the company at the end of the quarter. Aaron Cowen’s Suvretta Capital Management also initiated a $142.8 million position during the quarter. The other funds with brand new MO positions are William B. Gray’s Orbis Investment Management, John Armitage’s Egerton Capital Limited, and Daniel S. Och’s OZ Management.
Let’s now take a look at 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 U.S. Bancorp (NYSE:USB), Lowe’s Companies, Inc. (NYSE:LOW), Booking Holdings Inc. (NASDAQ:BKNG), and Fidelity National Information Services Inc. (NYSE:FIS). This group of stocks’ market values are similar to MO’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| USB | 50 | 8686368 | 3 |
| LOW | 77 | 5412801 | 1 |
| BKNG | 74 | 5578745 | -13 |
| FIS | 105 | 8073588 | 10 |
| Average | 76.5 | 6937876 | 0.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 76.5 hedge funds with bullish positions and the average amount invested in these stocks was $6938 million. That figure was $1750 million in MO’s case. Fidelity National Information Services Inc. (NYSE:FIS) is the most popular stock in this table. On the other hand U.S. Bancorp (NYSE:USB) is the least popular one with only 50 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 11.7% in 2020 through March 11th but beat the market by 3.1 percentage points. Unfortunately MO wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); MO investors were disappointed as the stock returned -18.9% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as most of these stocks already outperformed the market in Q1.
Disclosure: None. This article was originally published at Insider Monkey.
