Many prominent investors, including Warren Buffett, David Tepper and Stan Druckenmiller, have been cautious regarding the current bull market and missed out as the stock market reached another high in recent weeks. On the other hand, technology hedge funds weren’t timid and registered double digit market beating gains. Financials, energy and industrial stocks aren’t doing great but many of the stocks that delivered strong returns since March are still going very strong and hedge funds actually increased their positions in these stocks. In this article we will find out how hedge fund sentiment to Philip Morris International Inc. (NYSE:PM) changed recently.
Is Philip Morris International Inc. (NYSE:PM) the right pick for your portfolio? The smart money was in an optimistic mood. The number of bullish hedge fund positions advanced by 5 in recent months. Philip Morris International Inc. (NYSE:PM) was in 53 hedge funds’ portfolios at the end of June. The all time high for this statistics is 60. Our calculations also showed that PM isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks). There were 48 hedge funds in our database with PM holdings at the end of March.
Video: Watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 56 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 34% through August 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
John Rogers of Ariel Investments
At Insider Monkey we scour multiple sources to uncover the next great investment idea. Hedge fund sentiment towards Tesla reached its all time high at the end of 2019 and Tesla shares more than quadrupled this year. We are trying to identify other EV revolution winners, so we are checking out this under-the-radar lithium stock. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website to get excerpts of these letters in your inbox. Keeping this in mind we’re going to view the key hedge fund action surrounding Philip Morris International Inc. (NYSE:PM).
Hedge fund activity in Philip Morris International Inc. (NYSE:PM)
At Q2’s end, a total of 53 of the hedge funds tracked by Insider Monkey were long this stock, a change of 10% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards PM over the last 20 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Philip Morris International Inc. (NYSE:PM) was held by Cedar Rock Capital, which reported holding $686 million worth of stock at the end of September. It was followed by Gardner Russo & Gardner with a $578 million position. Other investors bullish on the company included Ariel Investments, GQG Partners, and AQR Capital Management. In terms of the portfolio weights assigned to each position Cedar Rock Capital allocated the biggest weight to Philip Morris International Inc. (NYSE:PM), around 16.69% of its 13F portfolio. Gardner Russo & Gardner is also relatively very bullish on the stock, earmarking 5.87 percent of its 13F equity portfolio to PM.
Now, key hedge funds were leading the bulls’ herd. Point72 Asset Management, managed by Steve Cohen, assembled the biggest position in Philip Morris International Inc. (NYSE:PM). Point72 Asset Management had $29.2 million invested in the company at the end of the quarter. Matthew Tewksbury’s Stevens Capital Management also initiated a $7.6 million position during the quarter. The other funds with brand new PM positions are Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Jinghua Yan’s TwinBeech Capital, and Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Philip Morris International Inc. (NYSE:PM) but similarly valued. We will take a look at International Business Machines Corp. (NYSE:IBM), Citigroup Inc. (NYSE:C), Charter Communications, Inc. (NASDAQ:CHTR), Wells Fargo & Company (NYSE:WFC), BHP Group (NYSE:BBL), The Boeing Company (NYSE:BA), and PetroChina Company Limited (NYSE:PTR). This group of stocks’ market valuations are closest to PM’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| IBM | 46 | 918051 | 5 |
| C | 96 | 6229205 | 10 |
| CHTR | 96 | 11227561 | -8 |
| WFC | 86 | 10344809 | 10 |
| BBL | 22 | 919411 | 1 |
| BA | 39 | 1280437 | -15 |
| PTR | 6 | 63660 | -1 |
| Average | 55.9 | 4426162 | 0.3 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 55.9 hedge funds with bullish positions and the average amount invested in these stocks was $4426 million. That figure was $2575 million in PM’s case. Citigroup Inc. (NYSE:C) is the most popular stock in this table. On the other hand PetroChina Company Limited (NYSE:PTR) is the least popular one with only 6 bullish hedge fund positions. Philip Morris International Inc. (NYSE:PM) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for PM is 62.6. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 30% in 2020 through October 23rd and surpassed the market by 21 percentage points. Unfortunately PM wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); PM investors were disappointed as the stock returned 7.9% since the end of June (through 10/23) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.
