After several tireless days we have finished crunching the numbers from nearly 750 13F filings issued by the elite hedge funds and other investment firms that we track at Insider Monkey, which disclosed those firms’ equity portfolios as of September 30th. The results of that effort will be put on display in this article, as we share valuable insight into the smart money sentiment towards Altria Group Inc (NYSE:MO).
Is Altria Group Inc (NYSE:MO) an excellent investment today? The smart money is becoming more confident. The number of long hedge fund positions advanced by 9 in recent months. Our calculations also showed that MO isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings, see the video below for Q2 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
Michael Price of MFP Investors
Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world’s most bearish hedge fund that’s more convinced than ever that a crash is coming, our long-short investment strategy doesn’t rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds‘ buy/sell signals. We’re going to view the latest hedge fund action surrounding Altria Group Inc (NYSE:MO).
How have hedgies been trading Altria Group Inc (NYSE:MO)?
At the end of the third quarter, a total of 47 of the hedge funds tracked by Insider Monkey were long this stock, a change of 24% from the previous quarter. The graph below displays the number of hedge funds with bullish position in MO over the last 17 quarters. With hedgies’ capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were upping their holdings substantially (or already accumulated large positions).
The largest stake in Altria Group Inc (NYSE:MO) was held by Renaissance Technologies, which reported holding $256.8 million worth of stock at the end of September. It was followed by AQR Capital Management with a $207.1 million position. Other investors bullish on the company included Two Sigma Advisors, Gardner Russo & Gardner, and Millennium Management. In terms of the portfolio weights assigned to each position Knoll Capital Management allocated the biggest weight to Altria Group Inc (NYSE:MO), around 3.37% of its portfolio. Twin Capital Management is also relatively very bullish on the stock, earmarking 2.58 percent of its 13F equity portfolio to MO.
As one would reasonably expect, specific money managers were breaking ground themselves. ExodusPoint Capital, managed by Michael Gelband, created the most outsized call position in Altria Group Inc (NYSE:MO). ExodusPoint Capital had $14.3 million invested in the company at the end of the quarter. Benjamin A. Smith’s Laurion Capital Management also made a $11.3 million investment in the stock during the quarter. The other funds with brand new MO positions are Donald Sussman’s Paloma Partners, Paul Marshall and Ian Wace’s Marshall Wace, and Michael Price’s MFP Investors.
Let’s go over 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 CME Group Inc (NASDAQ:CME), The Goldman Sachs Group, Inc. (NYSE:GS), Chubb Limited (NYSE:CB), and Sony Corporation (NYSE:SNE). This group of stocks’ market valuations resemble MO’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CME | 46 | 2245287 | 7 |
| GS | 72 | 8237468 | 11 |
| CB | 26 | 612921 | 1 |
| SNE | 26 | 783005 | -9 |
| Average | 42.5 | 2969670 | 2.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 42.5 hedge funds with bullish positions and the average amount invested in these stocks was $2970 million. That figure was $1365 million in MO’s case. The Goldman Sachs Group, Inc. (NYSE:GS) is the most popular stock in this table. On the other hand Chubb Limited (NYSE:CB) is the least popular one with only 26 bullish hedge fund positions. Altria Group Inc (NYSE:MO) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 34.7% in 2019 through November 22nd and outperformed the S&P 500 ETF (SPY) by 8.5 percentage points. Hedge funds were also right about betting on MO as the stock returned 19.8% during the fourth quarter (through 11/22) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.
