We recently compiled a list of the 14 Best 52-Week High Stocks to Buy According to Short Sellers. In this article, we are going to take a look at where Philip Morris International Inc. (NYSE:PM) stands against the other 52-week high stocks.
The U.S. stock market has been on a roll, with major indices clocking double-digit gains even with the U.S. economy showing signs of weakness. The gains have come from investors shrugging off the uncertainty around the U.S. presidential election and monetary policy to continue betting on various counters.
Consequently, the S&P 500 is already up more than 17% for the year, driven by gains in the communication services and financial services sectors. Likewise, technology stocks have also contributed to driving the overall market high as investors continue paying close attention to some of the big plays around artificial intelligence.
READ ALSO: 18 Best 52-Week Low Stocks to Buy Now According to Short Sellers and Top 10 ADR Stocks To Buy According to Hedge Funds.
The tech-heavy NASDAQ index, which gained 18% for the year, comes on growing expectations that the U.S. Federal Reserve has hit the peak of its monetary policy tightening spree. With expectations that the central bank will start cutting interest rates by as much as 50 basis points, according to CNBC, investors’ sentiments around tech stocks have improved significantly for September.
Investors remain optimistic about the stock market outlook heading into year end because of the positive impact of low interest rates. The Fed’s cutting interest rates will result in a significant drop in borrowing costs, which bodes well for capital-intensive businesses looking to access cheap capital.
The central bank aims to achieve a soft landing for the economy. In this situation, inflation must return to the 2% goal without the U.S. economy sliding into a downturn. If the central bank reduces interest rates prematurely, it faces the danger of a severe surge in inflation. Conversely, if it reduces rates too late, it might cause a severe recession.
While interest rate cuts are expected to offer a much-needed boost, disappointing earnings, and lackluster guidance could curtail market gains, especially for the best 52-week high stocks to buy, according to short sellers.
Several companies are under immense pressure after their valuation skyrocketed amid the artificial intelligence frenzy. Consequently, any concerns about slow earnings and revenue growth should send jitters, triggering significant pullbacks.
Adam Turnquist, the head of technical strategy at LPL Financial, mentioned that the S&P 500 typically experiences about three annual declines of at least 5%. On average, it has seen around one 10% decline each year.
“Expressing this data another way, 94% of years since 1928 have experienced a pullback of at least 5%, and 64% of years have had at least one 10% correction,” Turnquist said, according to USA Today. “We believe that how common these occurrences are should provide comfort to equity investors, allowing them to be patient.”
Looking forward to the rest of the year, experts predict that the best 52-week high stocks to buy, according to short sellers, could keep rising, but they caution about the dangers of premium valuations.
At the same time, financial experts believe that although economic expansion will slow down in the next few months, they don’t see a situation that could cause a recession.
Our Methodology
To compile the list of the best 52-week high stocks to buy now, according to short sellers, we first screened for stocks that were trading near their 52-week highs (0-10% range) using the Finviz stock screener. Next, we looked at their short interest and picked the stocks with the lowest short interest that were the most popular among elite hedge funds. The stocks are ranked in descending order based on their short interest.
At Insider Monkey, we are obsessed with 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 275% since May 2014, beating its benchmark by 150 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)
52 Week Range: $87.23 – $123.05
Current Share Price: $122.55
Short interest rate: 0.61%
Number of Hedge Fund Holders: 70
Philip Morris International Inc. (NYSE:PM) is a consumer defensive investment play that operates as a tobacco company. It strives to deliver a smoke-free future backed by a portfolio of products outside of the tobacco and nicotine sector. It is one of the stocks trading near its 52-week highs, signaling market confidence about its long-term prospects.
The company was on a roll in the second quarter, with both organic revenue and operating earnings hitting all-time highs. The firm’s products without tobacco, including IQOS and ZYN, have demonstrated considerable growth in regions such as Japan, Europe, and the U.S.
Even though challenges with the supply chain have impacted the ZYN product in the U.S. and delayed obtaining regulatory approval in Taiwan, the company has increased its projections for total revenue and operating earnings and adjusted diluted earnings per share for the full year.
During its second quarter, Philip Morris International Inc. (NYSE:PM) experienced robust expansion, with its organic revenue climbing 9.6% to $9.5 billion and adjusted earnings per share rising 10.6% to $1.77. The expansion within its smoke-free product lines was particularly noteworthy, with organic revenue surging by 18% and gross profit increasing by 22%. As the company’s focus shifts towards smoke-free offerings, it is expected to fuel further revenue growth.
Philip Morris International Inc. (NYSE:PM)’s shares have surged as the firm has excelled in shifting towards products without tobacco compared to competitors such as Altria and British American Tobacco. Approximately 40% of its income originates from advanced offerings such as Zen nicotine pouches and IOS heat-not-burn devices. Furthermore, it has secured the right to distribute its sticks in the U.S., creating a vast market for its tobacco-free products.
Philip Morris International Inc. (NYSE:PM) has revealed plans to invest $232 million to enlarge its manufacturing plant in Owensboro, Kentucky. This expansion, slated for completion by the second quarter of 2025, aims to meet the growing demand for its ZYN nicotine pouches. The investment also follows the company’s commitment to establish a new facility for nicotine pouch production in Aurora, Colorado.
Philip Morris International Inc. (NYSE:PM) appears to be trading at a discount, with a price-to-earnings multiple of 19, while offering a 4.24% dividend yield.
By the end of the second quarter, 70 of the 912 hedge funds tracked by Insider Monkey held shares in Philip Morris International Inc. (NYSE:PM). The largest shareholder was GQG Partners, managed by Rajiv Jain, with a $3.67 billion investment in the company.
Overall PM ranks 5th on our list of the best 52-week high stocks to buy according to short sellers. While we acknowledge the potential of PM as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for a promising AI stock that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: $30 Trillion Opportunity: 15 Best Humanoid Robot Stocks to Buy According to Morgan Stanley and Jim Cramer Says NVIDIA ‘Has Become A Wasteland’.
Disclosure: None. This article is originally published at Insider Monkey.