We recently published a list of 12 Best FMCG Stocks to Buy According to Billionaires. In this article, we are going to take a look at where Philip Morris International Inc. (NYSE:PM) stands against other best FMCG stocks to buy according to billionaires.
Historically, the consumer-packaged-goods (CPG) industry outperformed most of the other industries, mainly due to the high growth and consistent margins, says McKinsey. However, since 2012, numerous factors, such as inflation, market saturation, significant competition, fluctuating consumer tastes and behaviors, along with a fragmented consumer base resulted in growth challenges. Given increased interest rates and elevated industry multiples over the previous few years, there has been lesser deal activity, says the firm. Furthermore, a range of leading CPG companies continue to take a more measured approach, emphasizing midsize deals and aiming to achieve cost and growth synergies.
What Lies Ahead?
The broader downward trend of rates, along with strong, cash-rich balance sheets (and increased capability to take more affordable debt) of CPG companies can result in higher deal activity over the near future for the sector, says McKinsey. The firm expects a mix of 3 types of transactions, i.e., signature, sector-shaping deals, sizable horizontal deals allowing for greater subcategory consolidation, and targeted spin-offs of brands and business units possessing limited synergies or growth enablers with their current owner.
While the consumer sector remains broad, much of the analysis was focused on the F&B sector. McKinsey anticipates to see increased activity throughout CPG sectors, mainly in the personal care and beauty sectors. However, it also expects that the F&B sector might continue to capture a significant share of deals.
READ ALSO: 7 Best Stocks to Buy For Long-Term and 8 Cheap Jim Cramer Stocks to Invest In.
Different Levers for Growth
Deloitte believes that, in 2025, the consumer products companies are likely to address the product portfolio and mix in a bid to entice the consumer and invest across the broad set of demand-generation capabilities. Furthermore, the businesses are projected to develop transformative efficiency so that savings can be produced, which can help finance such investments. Deloitte points out that increasing the unit volume sold remains an important lever that can support in driving profitable growth. Notably, some consumer products companies, mainly the profitable growers, remain focused on innovation to re-engage consumers. Deloitte also highlighted that high-performing companies seem to be adopting a clear-eyed view of their portfolios, and they continue to divest and acquire as needed.
Our Methodology
To list the 12 Best FMCG Stocks to Buy According to Billionaires, we used a screener and Insider Monkey’s exclusive database of billionaire stock holdings to shortlist the companies catering to the broader FMCG space. For the stocks with the same number of billionaire holdings, we have used the number of hedge fund investors as a secondary metric to rank the stocks, as of Q4 2024. We also mentioned the hedge fund sentiments around each stock, as of Q4 2024.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
A man exhaling smoke from a cigarette indicating the use of tobacco products.
Philip Morris International Inc. (NYSE:PM)
Number of Billionaire Investors: 22
Number of Hedge Fund Holders: 102
Philip Morris International Inc. (NYSE:PM) operates as a tobacco company. Bonnie Herzog, an analyst from Goldman Sachs, reiterated a “Buy” rating on the company’s stock. Notably, the associated price target stood at $165.00. The rating is backed by factors demonstrating its promising future. As per the analyst, Philip Morris International Inc. (NYSE:PM)’s leadership continues to exhibit healthy confidence in its ability to witness sustainable growth and provide shareholder returns, thanks to its commitment to a smoke-free transformation. The analyst went on to add that the transition is aided by a strong multi-category strategy that focuses on capturing a significant share of the growing global nicotine market.
Elsewhere, Eric Serotta from Morgan Stanley maintained a “Buy” rating on the company’s stock with a price objective of $156.00. The rating is backed by Philip Morris International Inc. (NYSE:PM)’s robust positioning in the broader smoke-free product market. As per the analyst, the company remains optimistic about the sustained growth of the smoke-free portfolio, which consists of products such as IQOS and ZYN. With respect to the smoke-free business (SFB), Q4 2024 shipments of HTU and oral smoke-free products surpassed 40 billion units for the first time, fueling Philip Morris International Inc. (NYSE:PM)’s smoke-free business to a superior performance, with full-year net revenues rising 14.2% and gross profit improving 18.7%.
Broyhill Asset Management, an investment advisor, released a Q3 2024 investor letter. Here is what the fund said:
“Shares of Philip Morris International Inc. (NYSE:PM) gained 21% in Q3. Philip Morris was by far the largest contributor for the quarter. Our core thesis focuses on the shift in business mix from combustible cigarettes towards reduced risk products as well as the company’s re-entry to the US market with its acquisition of Swedish Match. This year, Zyn has become wildly popular. So much so that the company can barely keep it in stock, even as it expands production. We recently discussed how youth usage of these products, a common critique of the company, remains under 2%, even as its overall popularity drives higher volume.”
Overall, PM ranks 1st on our list of best FMCG stocks to buy according to billionaires. While we acknowledge the potential of PM as an investment, our conviction lies in the belief that some deeply undervalued AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for a deeply undervalued AI stock that is more promising than PM but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 20 Best AI Stocks To Buy Now and 30 Best Stocks to Buy Now According to Billionaires.
Disclosure: None. This article is originally published at Insider Monkey.
