It is already common knowledge that individual investors do not usually have the necessary resources and abilities to properly research an investment opportunity. As a result, most investors pick their illusory “winners” by making a superficial analysis and research that leads to poor performance on aggregate. The Standard and Poor’s 500 Index returned 5.2% over the 12-month period ending October 30, while more than 51% of the constituents of the index underperformed the benchmark. Hence, a random stock picking process will most likely lead to disappointment. At the same time, the 30 most favored S&P 500 stocks by the hedge funds monitored by Insider Monkey (as of September 2014) generated a return of 9.5% over the same time span, with 63% of these stocks outperforming the benchmark. Of course, hedge funds do make wrong bets on some occasions and these get disproportionately publicized in financial media, but piggybacking their moves can beat the broader market on average. That’s why we are going to go over recent hedge fund activity in Philip Morris International Inc. (NYSE:PM).
Is Philip Morris International worth your attention right now? Investors who are in the know are taking a bullish view. The number of long hedge fund positions inched up by 1 in recent months. PM was in 42 hedge funds’ portfolios at the end of September. There were 41 hedge funds in our database with PM holdings at the end of the previous quarter. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity, but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Unilever N.V. (ADR) (NYSE:UN), Unilever plc (ADR) (NYSE:UL), and UnitedHealth Group Inc. (NYSE:UNH) to gather more data points.
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Today there are numerous formulas stock traders put to use to assess stocks. A couple of the most underrated formulas are hedge fund and insider trading activity. Our researchers have shown that, historically, those who follow the best picks of the top money managers can outpace their index-focused peers by a superb amount (see the details here).
Now, let’s go over the fresh action encompassing Philip Morris International Inc. (NYSE:PM).
How have hedgies been trading Philip Morris International Inc. (NYSE:PM)?
At the end of the third quarter, a total of 42 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 2% from one quarter earlier. With the smart money’s capital changing hands, there exists a select group of noteworthy hedge fund managers who were boosting their holdings meaningfully (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Cedar Rock Capital, managed by Andy Brown, holds the number one position in Philip Morris International Inc. (NYSE:PM). Cedar Rock Capital has a $987.4 million position in the stock, comprising 25.7% of its 13F portfolio. On Cedar Rock Capital’s heels is Tom Russo’s Gardner Russo & Gardner with a $831.4 million position; the fund has 7.5% of its 13F portfolio invested in the stock. Other professional money managers with similar optimism include Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Phill Gross and Robert Atchinson’s Adage Capital Management and Cliff Asness’ AQR Capital Management.
Consequently, some big names have been driving this bullishness. Highbridge Capital Management, managed by Glenn Russell Dubin, established the biggest position in Philip Morris International Inc. (NYSE:PM). Highbridge Capital Management had $31.1 million invested in the company at the end of the quarter. Richard Driehaus’ Driehaus Capital also made a $19.2 million investment in the stock during the quarter. The other funds with new positions in the stock are Peter Muller’s PDT Partners, Gavin Saitowitz and Cisco J. del Valle’s Springbok Capital, and Dmitry Balyasny’s Balyasny Asset Management.
Let’s now take a look at hedge fund activity in other stocks similar to Philip Morris International Inc. (NYSE:PM). We will take a look at Unilever N.V. (ADR) (NYSE:UN), Unilever plc (ADR) (NYSE:UL), UnitedHealth Group Inc. (NYSE:UNH), and Taiwan Semiconductor Mfg. Co. Ltd. (ADR) (NYSE:TSM). This group of stocks’ market valuations resemble PM’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| UN | 13 | 1075944 | -2 |
| UL | 13 | 262749 | 3 |
| UNH | 51 | 2823923 | -10 |
| TSM | 32 | 1286179 | 5 |
As you can see these stocks had an average of 27 hedge funds with bullish positions and the average amount invested in these stocks was $1.36 billion. That figure was $3.13 billion in PM’s case. UnitedHealth Group Inc. (NYSE:UNH) is the most popular stock in this table, while Unilever N.V. (ADR) (NYSE:UN) is the least popular one with only 13 bullish hedge fund positions. Philip Morris International Inc. (NYSE:PM) is not the most popular stock in this group, but hedge fund interest is still above average. This is a slightly positive signal, but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard UNH might be a better candidate to consider a long position.
