We recently published a list of 12 Best FMCG Stocks To Buy According to Hedge Funds. 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 hedge funds.
Consumer Staples Outlook For 2025
Consumer staples refer to essential daily-use products such as packaged food, toothpaste, and dish detergent. These products often run out quickly off the supermarket shelves and are considered “defensive” because consumers continue to purchase these necessities even during economic downturns. Moreover, consumer staple companies are mostly mature dividend payers.
On December 10, 2024, Ben Shuleva, Fidelity Sector Portfolio Manager shared his outlook for the sector in a report published on Fidelity Investments. The consumer staples sector had a positive year but lagged behind the broader market due to investors favoring higher-growth stocks. The high interest rates and concerns about GLP-1 weight-loss drugs affecting food consumption also impacted performance negatively. However, despite these challenges, the sector still posted strong absolute gains. Compared to the S&P 500 index the consumer staple sector gained 16.7% on a year-to-date basis as of December 9, whereas the S&P 500 index gained 26.9% during the same time.
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Ben Shuleva from Fidelity Investments anticipates a return to normalcy for the consumer staples sector in 2025. He suggests this based on a broadly stable economic environment with healthy employment and steady real wage growth. In addition, the Fed is expected to begin cutting interest rates, which could boost dividend-paying stocks. Lastly, consumer spending has remained strong and is expected to remain resilient in 2025, thereby indicating positive sales growth for the sector. Shuleva anticipates that these factors will lead the sector to outperform the broader market in 2025. However, there could be a few uncertainties that could hamper the growth trajectory. The new presidential administration may introduce changes in tariff policies, which could affect certain consumer staples products. Although most consumer staples are manufactured domestically, so the direct impact of tariffs might be limited. Moreover, a strengthening US dollar can negatively affect consumer staples companies with international operations by reducing their foreign earnings when converted back into dollars. Shuleva emphasizes focusing on core fundamentals when investing in consumer staple companies, such as those operating in favorable market structures and maintaining strong underlying growth profiles.
Our Methodology
To complete the list of the 12 best FMCG stocks to buy according to hedge funds, we used the Consumer Staples Select Sector SPDR Fund and Vanguard Consumer Staples ETF. We selected pure-play Fast-Moving Consumer Goods-producing companies from the holdings of these two ETFs and ranked them in ascending order of the number of hedge funds that held stakes in them at the close of the third quarter. The number of hedge funds was sourced from Insider Monkey’s third-quarter 2024 database.
Why do we care about what hedge funds do? 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)
Number of Hedge Fund Holders: 75
Philip Morris International Inc. (NYSE:PM) is a leading global tobacco company. Its product portfolio includes cigarettes and smoke-free products, which include heat-not-burn, vapor, and oral nicotine products. On January 31, Eric Serotta from Morgan Stanley initiated a Buy rating on the stock with a price target of $140. The company has been undergoing a strategic transformation towards smoke-free products to reduce smoking-related health risks.
In the fiscal fourth quarter results for 2024, which were released recently, Philip Morris International Inc. (NYSE:PM) reported revenue of $9.71 billion, exceeding analyst expectations by 2.8%. The company acquired Swedish Match back in November 2022 to enhance its portfolio with the ZYN brand, later FDA authorized all ZYN nicotine pouches currently marketed in the US. During the quarter its smoke-free segment accounted for 40% of total net revenues and around 42% of gross profit. The segment growth was driven by strong performances from IQOS and ZYN nicotine pouches. Looking ahead, Philip Morris International Inc. (NYSE:PM) expects an adjusted EPS between $7.04 and $7.17, indicating potential growth up to about 9% compared to previous estimates. It is the best FMCG stock to buy according to hedge funds.
Broyhill Asset Management stated the following regarding Philip Morris International Inc. (NYSE:PM) in its Q3 2024 investor letter:
“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 hedge funds. While we acknowledge the potential of PM to grow, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an 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.
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Disclosure: None. This article is originally published at Insider Monkey.
