We at Insider Monkey have gone over 873 13F filings that hedge funds and prominent investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of June 30th. In this article, we look at what those funds think of Philip Morris International Inc. (NYSE:PM) based on that data.
Is Philip Morris International Inc. (NYSE:PM) a worthy investment right now? The smart money was taking a bearish view. The number of bullish hedge fund positions dropped by 2 in recent months. Philip Morris International Inc. (NYSE:PM) was in 46 hedge funds’ portfolios at the end of June. The all time high for this statistic is 60. Our calculations also showed that PM isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).
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 79 percentage points since March 2017 (see the details here). 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. For example, billionaire John Paulson is loading up on the miners, so we are checking out stock pitches like this mining stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. Now let’s analyze the new hedge fund action encompassing Philip Morris International Inc. (NYSE:PM).
Do Hedge Funds Think PM Is A Good Stock To Buy Now?
At second quarter’s end, a total of 46 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -4% from the first quarter of 2020. On the other hand, there were a total of 53 hedge funds with a bullish position in PM a year ago. With hedge funds’ capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were adding to their stakes considerably (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, Terry Smith’s Fundsmith LLP has the number one position in Philip Morris International Inc. (NYSE:PM), worth close to $1.9181 billion, accounting for 5.3% of its total 13F portfolio. The second largest stake is held by Rajiv Jain of GQG Partners, with a $1.164 billion position; 3.4% of its 13F portfolio is allocated to the stock. Some other professional money managers that are bullish consist of Andy Brown’s Cedar Rock Capital, Tom Russo’s Gardner Russo & Gardner and John W. Rogers’s Ariel Investments. 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 19.27% of its 13F portfolio. Gardner Russo & Gardner is also relatively very bullish on the stock, setting aside 6.62 percent of its 13F equity portfolio to PM.
Due to the fact that Philip Morris International Inc. (NYSE:PM) has experienced falling interest from the smart money, we can see that there were a few hedge funds who were dropping their full holdings last quarter. It’s worth mentioning that Paul Marshall and Ian Wace’s Marshall Wace LLP dropped the biggest stake of the “upper crust” of funds followed by Insider Monkey, valued at close to $60 million in stock, and Steve Cohen’s Point72 Asset Management was right behind this move, as the fund sold off about $25.6 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest was cut by 2 funds last quarter.
Let’s check out hedge fund activity in other stocks similar to Philip Morris International Inc. (NYSE:PM). These stocks are Royal Dutch Shell plc (NYSE:RDS), Unilever PLC (NYSE:UL), Honeywell International Inc. (NASDAQ:HON), Linde plc (NYSE:LIN), Bristol Myers Squibb Company (NYSE:BMY), Charter Communications, Inc. (NASDAQ:CHTR), and Citigroup Inc. (NYSE:C). This group of stocks’ market valuations are similar to PM’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| RDS | 38 | 2444791 | 2 |
| UL | 19 | 844216 | -1 |
| HON | 57 | 1834599 | 1 |
| LIN | 55 | 5920316 | 12 |
| BMY | 73 | 5202516 | -8 |
| CHTR | 75 | 19486659 | 1 |
| C | 87 | 6155245 | -3 |
| Average | 57.7 | 5984049 | 0.6 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 57.7 hedge funds with bullish positions and the average amount invested in these stocks was $5984 million. That figure was $5974 million in PM’s case. Citigroup Inc. (NYSE:C) is the most popular stock in this table. On the other hand Unilever PLC (NYSE:UL) is the least popular one with only 19 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 45.9. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 29.6% in 2021 through November 5th and surpassed the market again by 3.1 percentage points. Unfortunately PM wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); PM investors were disappointed as the stock returned -3.7% since the end of June (through 11/5) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2021.
Follow Philip Morris International Inc. (NYSE:PM)
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Disclosure: None. This article was originally published at Insider Monkey.
