In this article, we discuss the 10 European stocks to buy according to Tom Russo’s hedge fund.
Tom Russo started his career at Gardner Russo & Gardner LLC in 1989 as a partner, and in 2014, he became the managing member of the hedge fund. He is also the partner and manager at Semper Vic Partners, which is a private hedge fund owned by Garner Russo & Gardner LLC, where he manages a portfolio with a gross asset value over $2.3 billion.
Russo’s hedge fund manages $11.8 billion in 13F securities as of the second quarter. His investment philosophy stresses upon return on capital, and he generally prefers equity investments. Russo looks for businesses that have good cash flows, strong balance sheets, and a demonstrated history of generating high rates of returns on fixed and current assets. He hunts for companies with his preferred financial statistics at bargain prices.
Russo’s investment portfolio reflects a limited number of industries which have historically presented a stable and strong free cash flow. This is a measure taken to limit risk by Russo, and he diversifies his investment portfolio by buying stakes in small-cap companies and investing in his typical choice of industries in foreign markets. His investment philosophy aims for absolute returns rather than relative returns. Russo also manages separate accounts for individuals, trusts, and endowments in addition to his clients at Gardner Russo & Gardner LLC and Semper Vic Partners.
The top ten holdings comprise 75.58% of Russo’s portfolio with investments concentrated in finance, consumer staples, consumer discretionary, and communications sectors.
He is a graduate from Dartmouth College and completed his Master’s degree from Stanford Business and Law Schools. Russo is a member of the Dean’s Advisory Council for Stanford Law School, Dartmouth College’s President’s Leadership Council, and California Bar Association. Russo is also a charter member of the Advisory Board for the Heilbrunn Center for Graham & Dodd Investing at Columbia Business School. In addition to that, he serves on the boards of the Winston Churchill Foundation of the U.S., Facing History and Ourselves, and Storm King Art Center.
The largest holding in Russo’s portfolio is Berkshire Hathaway Inc. (NYSE:BRK-B). The American conglomerate holding company makes up 11.12% of Russo’s 13F portfolio.
Some of the notable stocks in Russo’s Q2 2021 portfolio include Exxon Mobil Corporation (NYSE:XOM), Alphabet Inc. (NASDAQ:GOOG), and Berkshire Hathaway Inc., among others.
Photo by Nicholas Cappello on Unsplash
Why should we pay attention to Russo’s stock picks? Insider Monkey’s research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 86 percentage points since March 2017. Between March 2017 and July 2021, our monthly newsletter’s stock picks returned 186.1%, vs. 100.1% for the SPY. Our stock picks outperformed the market by more than 86 percentage points (see the details here). That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to. You can subscribe to our free newsletter on our homepage to receive our stories in your inbox.
Our Methodology
With this context in mind, here are the 10 European stocks to buy according to Tom Russo’s hedge fund. We used Gardner Russo & Gardner’s 13F portfolio for the second quarter of 2021 for this analysis.
European Stocks to Buy According to Tom Russo’s Hedge Fund
10. L’Oréal S.A. (OTC:LRLCY)
Russo’s Stake Value: $3,129,000
Percentage of Russo’s 13F Portfolio: 0.02%
Number of Hedge Fund Holders: 2
The tenth stock on our list of the 10 European stocks to buy according to Tom Russo’s hedge fund is L’Oréal S.A., which is a French cosmetics mega company headquartered in Clichy, France, serving customers worldwide.
Russo’s hedge fund owns 7020 shares in L’Oréal S.A., amounting to $3.12 million, and making up 0.02% of Russo’s 13F portfolio.
Out of the hedge funds tracked by Insider Monkey, Washington-based Fisher Asset Management is the leading shareholder in L’Oréal S.A. with 14.1 million shares worth over $1.26 billion.
Like Exxon Mobil Corporation, Alphabet Inc., and Berkshire Hathaway Inc., L’Oréal S.A. is a notable stock in Russo’s Q2 portfolio.
9. Carlsberg A/S (OTC:CABGY)
Russo’s Stake Value: $4,156,000
Percentage of Russo’s 13F Portfolio: 0.03%
Number of Hedge Fund Holders: N/A
The ninth stock on our list of the 10 European stocks to buy according to Tom Russo’s hedge fund is Carlsberg A/S (OTC:CABGY), which is a multinational brewery headquartered in Copenhagen, Denmark. Founded in 1847, the company serves its beverages globally, with some of its signature brands being Carlsberg, Tuborg, Neptun, the Russian bestseller Baltika, Belgian Grimbergen, amongst more than 500 other local beer brands. Carlsberg A/S has a market cap of $23.74 billion.
Russo’s hedge fund owns 22,291 shares in Carlsberg A/S, amounting to $4.15 million, and making up 0.03% of Russo’s 13F portfolio.
On August 19, Barclays reiterated an Overweight rating on Carlsberg A/S, however, the stock was downgraded on September 29 by Deutsche Bank Aktiengesellschaft, who changed their rating from Buy to Hold on Carlsberg A/S.
Like Exxon Mobil Corporation, Alphabet Inc., and Berkshire Hathaway Inc., Carlsberg A/S is a notable stock in Russo’s Q2 portfolio.
8. Swedish Match AB (publ) (OTC:SWMAY)
Russo’s Stake Value: $11,592,000
Percentage of Russo’s 13F Portfolio: 0.09%
Number of Hedge Fund Holders: N/A
The eighth stock on our list of the 10 European stocks to buy according to Tom Russo’s hedge fund is Swedish Match AB (publ) (OTC:SWMAY), which is a Swedish company known for its smokeless tobacco products like snus, moist snuff, chewing tobacco, cigars, and matches. Founded in 1915, headquartered in Stockholm, Sweden, Swedish Match AB (publ) (OTC:SWMAY) operates across 11 countries. The company’s chewing tobacco brand, Red Man, holds 40% of the USA market share, whereas the brands manufacturing matches under Swedish Match AB (publ) (OTC:SWMAY) are market leaders in the UK, Scandinavia, France, Spain, Australia, and Brazil. The company has a market cap of $13.7 billion.
Russo’s hedge fund owns 1.35 million shares in Swedish Match AB (publ) (OTC:SWMAY), amounting to $11.59 million, and making up 0.09% of Russo’s 13F portfolio.
On September 15, a Reuters report suggested that by the second half of 2022, Swedish Match AB (publ) (OTC:SWMAY) plans to separate its USA cigar business and list it on a major securities exchange. This would mean that the company would exit from the combustible tobacco products segment.
7. Davide Campari-Milano N.V. (OTC:DVDCF)
Russo’s Stake Value: $11,815,000
Percentage of Russo’s 13F Portfolio: 0.09%
Number of Hedge Fund Holders: N/A
Russo’s hedge fund owns 882,086 shares in Davide Campari-Milano N.V. (OTC:DVDCF), amounting to $11.8 million, and making up 0.09% of Russo’s 13F portfolio.
The company’s leading beverage, Aperol, has a lot of competition in the market. Yet, on August 31, the company CEO, Bob Kunze-Concewitz said in a Reuters interview that Davide Campari-Milano N.V. is not worried about the growing competition, and that Aperol has tremendous potential for growth in the coming years. By company estimates, they can penetrate a larger market share among beer drinkers and experience growth by double digits.
Like Exxon Mobil Corporation, Alphabet Inc., and Berkshire Hathaway Inc., Davide Campari-Milano N.V. is a notable stock in Russo’s Q2 portfolio.
6. Anheuser-Busch InBev SA/NV (NYSE:BUD)
Russo’s Stake Value: $380,024,000
Percentage of Russo’s 13F Portfolio: 3.21%
Number of Hedge Fund Holders: 18
Anheuser-Busch InBev SA/NV (NYSE: BUD), widely known as AB InBev, is a Belgian drink and brewing company, and it ranks sixth on our list of the 10 European stocks to buy according to Tom Russo’s hedge fund. The mega-corporation headquartered in Leuven, Belgium, has a vast global footprint – boasting offices in New York City, São Paulo, London, St. Louis, Mexico City, Bremen, and Johannesburg among others. Primarily listed on the Euronext Brussels, the company has secondary listings on the Mexico City, Johannesburg, and New York Stock Exchanges.
After acquiring or merging with several medium and large-scale breweries, AB InBev’s portfolio has more than 400 local, international and global beer brands. The most popularly recognized global beer brands under AB InBev include Budweiser, Corona, and Stella Artois. The company has a market cap of $113.09 billion.
Russo’s hedge fund owns 5.26 million shares in Anheuser-Busch InBev SA/NV, amounting to $380 million, and making up 3.21% of Russo’s 13F portfolio.
At the end of the second quarter of 2021, 18 hedge funds in Insider Monkey’s database held stakes amounting to $1.2 billion in Anheuser-Busch InBev SA/NV. This is compared to the same number of hedge funds in the previous quarter, with stakes worth $979.9 million.
Like Exxon Mobil Corporation, Alphabet Inc., and Berkshire Hathaway Inc., Anheuser-Busch InBev SA/NV is a notable stock in Russo’s Q2 portfolio.
5. Heineken N.V. (XAMS:HEIA.AS)
Russo’s Stake Value: $745,179,000
Percentage of Russo’s 13F Portfolio: 6.29%
Number of Hedge Fund Holders: –
The fifth stock on our list of the 5 European stocks to buy according to Tom Russo’s hedge fund is Heineken N.V. (XAMS:HEIA.AS), which is a multinational brewing company headquartered in Amsterdam. The company has more than 150 breweries across 70 countries, and is the second largest brewery worldwide, after Anheuser-Busch InBev SA/NV. The Dutch beverage giant, Heineken N.V. (XAMS:HEIA.AS), has 348 beer and cider brands under its domain, which are served both locally and internationally. The company has a market capitalization of $60.22 billion.
Russo’s hedge fund owns 7.39 million shares in Heineken N.V. (XAMS:HEIA.AS), amounting to $745.1 million, and making up 6.29% of Russo’s 13F portfolio.
The company reported earnings per share for 2020 as -$0.42, which was a major step down as compared to the EPS last year at $4.37. Heineken N.V. (XAMS:HEIA.AS) suffered a major financial setback from forced lockdowns due to the COVID-19 pandemic, so it increased investments to diversify its portfolio. On August 30, it was reported that the company would invest £38 million in its Star Pubs & Bars by the end of 2021, which would create more than 500 jobs and benefit 700 pubs under the company’s domain. They plan to establish new outlets near residential areas since many people now work from home as a result of the COVID-19 pandemic, which has increased the foot traffic in neighborhood drinking joints.
4. Pernod Ricard SA (OTC:PDRDY)
Russo’s Stake Value: $753,161,000
Percentage of Russo’s 13F Portfolio: 6.36%
Number of Hedge Fund Holders: 1
The fourth stock on our list of the 5 European stocks to buy according to Tom Russo’s hedge fund is Pernod Ricard SA (OTC:PDRDY), which is a French alcoholic beverage mega company. The company is named after its two most popular products – Pernod Anise and Ricard Pastis.
Pernod Ricard is known for pastis, which are anise-flavored spirits – commonly consumed in France. Headquartered in Paris, the company’s global footprint expands to Europe, Middle East, Africa, Asia & Pacific, and the Americas. Pernod Ricard SA has a market capitalization of $57.75 billion.
Russo’s hedge fund owns 3.39 million shares in Pernod Ricard SA, amounting to $753.1 million, and making up 6.36% of Russo’s 13F portfolio.
According to a press release on September 21, Pernod Ricard SA will acquire The Whiskey Exchange, which is an online and physical retailer of spirits in the UK. The Whiskey Exchange is a leading e-commerce spirits retailer with 10,000 products under the brand name. This strategic acquisition is in line with Pernod Ricard’s strategy to enter the e-commerce consumer market, and meet the demand for unique and premium blends.
3. Compagnie Financière Richemont SA (OTC:CFRUY)
Russo’s Stake Value: $778,072,000
Percentage of Russo’s 13F Portfolio: 6.57%
Number of Hedge Fund Holders: 2
The third stock on our list of the 5 European stocks to buy according to Tom Russo’s hedge fund is Compagnie Financière Richemont SA (OTC:CFRUY), which is a Swiss luxury goods company headquartered in Bellevue, Switzerland. Founded in 1988, Compagnie Financière Richemont SA specializes in luxury products such as jewelry, leather goods, watches, firearms, accessories, and more. The flagship brands owned by Compagnie Financière Richemont SA include Cartier, Chloé, Dunhill, Montblanc, and Baume & Mercier among others. The company has a market cap of $60.29 billion.
Russo’s hedge fund owns about 6.4 million shares in Compagnie Financière Richemont SA, amounting to $778 million, and making up 6.57% of Russo’s 13F portfolio.
At the end of the second quarter of 2021, 2 hedge funds in Insider Monkey’s database held stakes amounting to $227.3 million in Compagnie Financière Richemont SA. This is compared to the same number of hedge funds in the previous quarter, with stakes worth $181.6 million.
On September 23, the board of Compagnie Financière Richemont SA announced that the dividend would be raised to $2.15, which means the dividend yield would increase by 1.9% – a statement that satisfied the shareholders immensely.
2. Philip Morris International Inc. (NYSE:PM)
Russo’s Stake Value: $783,039,000
Percentage of Russo’s 13F Portfolio: 6.61%
Number of Hedge Fund Holders: 46
The second stock on our list of the 5 European stocks to buy according to Tom Russo’s hedge fund is Philip Morris International Inc. (NYSE:PM), which is a multinational Swiss-American tobacco and cigarette manufacturer. Philip Morris International Inc. is headquartered in Lausanne, Switzerland, and was founded originally in 1847. It is one of the companies that make up Big Tobacco, along with tobacco giants like Altria Group, Inc. (NYSE:MO), British American Tobacco p.l.c. (NYSE:BTI), Imperial Brands PLC (OTC:IMBBY), and Japan Tobacco Inc. (OTC:JAPAY). The flagship brand under Philip Morris International Inc. is Marlboro, which is a cigarette brand consumed worldwide. The company is a long-term sponsor of the Formula One team Scuderia Ferrari.
Philip Morris International Inc. has a market capitalization of $149.75 billion. It is also traded as a S&P 100 and S&P 500 component.
Russo’s hedge fund owns 7.9 million shares in Philip Morris International Inc., amounting to $783 million and making up 6.61% of Russo’s 13F portfolio.
At the end of the second quarter of 2021, 46 hedge funds in Insider Monkey’s database held stakes amounting to $5.97 billion in Philip Morris International Inc., up from 48 in the previous quarter with stakes worth $5.49 billion.
The company reported last quarter’s earnings per share of $1.57 on July 20, beating analysts’ consensus estimates of $1.55 by $0.02. The actual revenue for Philip Morris International Inc. was $7.59 billion, missing analysts’ estimates by $114.07 million.
On August 19, Deutsche Bank maintained a Buy rating on Philip Morris International Inc., raising the price target to $111.32 from $96.08.
Out of the hedge funds tracked by Insider Monkey, London-based Fundsmith LLP is the leading shareholder in Philip Morris International Inc., with over 19.3 million shares worth $1.91 billion.
Broyhill Asset Management, in its Q2 2021 investor letter, mentioned that Philip Morris International Inc. shook off the prospects of a ban on menthol and a potential cap on nicotine. Here is what the fund said:
“Philip Morris (PM) shook off the prospects of a ban on menthol and a potential cap on nicotine and gained 23%. We shared our thoughts on these regulations during the quarter, which are available here.
‘PM Valuation. PM is up ~ 15% YTD and would have the most to gain under a nicotine cap. A cap would likely accelerate conversion to iQOS, which is 100% incremental for PM (PM also has zero exposure to combustible cigarettes in the U.S. and licenses its IQOS product for MO to distribute domestically). As such, the decline in PM was much more muted, with the stock hitting new 52 week highs a day after the Biden headline, driven by yesterday’s earnings release. It didn’t take long for investors to shift their attention back to fundamentals and the fundamentals here are best in class. In short, results beat estimates across the board (a recurring theme here), and management raised guidance for the full year (another recurring theme). IQOS continued to deliver impressive growth, recording continued market share gains on the heels of continued user acquisition growth, up 1.5M to 19.1M total users. Importantly, IQOS now represents nearly 30% of PM net revenues (management expects “smoke-free” products to represent more than half of their business by 2025, which should make the ESG folks happy), which is driving top-line growth and margin expansion. Hard to believe that they have created a product with higher margins than combustible cigarettes!! We expect PM operating margins to increase by 100bps – 200bps annually as IQOS continues to gain share. The stock trades at ~ 15x today or 2/3 of the market’s multiple for a business likely to generate $35B in cash flow – or 25% of the market cap – in just the next three years. Over the last decade, shares have traded at an average multiple of 18x and within a range of ~ 14x – 22x (+/-1 standard deviation). The stock yields 5.1% at the current price, and we expect management to resume share purchases in the back half of this year.’”
1. Nestlé S.A. (OTC:NSRGY)
Russo’s Stake Value: $1,219,960,000
Percentage of Russo’s 13F Portfolio: 10.3%
Number of Hedge Fund Holders: 4
The stock ranking first on our list of the 5 European stocks to buy according to Tom Russo’s hedge fund is Nestlé S.A. (OTC:NSRGY), which is a Swiss multinational food and beverage megacorporation, headquartered in Vevey, Switzerland. It has remained the largest food company worldwide since 2014 by revenue. Nestlé S.A. products include breakfast cereals, bottled water, baby formula, snacks, juices, and coffee, among others. The famous brands under Nestlé S.A. are Nespresso, Nescafé, Kit Kat, Nesquik, Maggi, and more. The company is also a major shareholder in L’Oréal S.A.. Founded in 1866, Nestlé S.A. products have become consumer staples worldwide, with 180 countries being served by the food and beverage conglomerate. Nestlé S.A. has a market cap of $331.4 billion.
Russo’s hedge fund owns 9.78 million shares in Nestlé S.A., amounting to $1.21 billion, and making up 10.3% of Russo’s 13F portfolio.
At the end of the second quarter of 2021, 4 hedge funds in Insider Monkey’s database held stakes amounting to $1.82 billion in Nestlé S.A.. This is compared to the same number of hedge funds in the previous quarter, with stakes worth $1.64 billion.
On October 1, analysts maintained an Overweight rating on Nestlé S.A., raising the price target to $142.5 from $120.49. Out of the hedge funds tracked by Insider Monkey, Russo’s Gardner Russo & Gardner is the leading shareholder in Nestlé S.A..
Semper Vic Partners, in its Q2 2021 investor letter, mentioned that Nestlé S.A.’s shares are well-positioned in its portfolios based on the company’s global growth potential. Here is what the fund said:
“I believe that Nestlé shares are well-positioned in our portfolios based on its global growth potential. Nestlé’s global growth potential is a dividend from their trusted consumer brands’ 100-year command presence in over 100 countries. Over these years, Nestlé has developed trusted and cherished iconic brands. For instance, Nestlé has over 30 brands that have over $1 billion of annual turnover. Nestlé benefits from a vast Total Addressable Market (TAM)
available through developing and emerging market consumers shifting from subsistence economies to the introduction of market-based economies. Nestlé benefits from its market leadership in two key categories that evidence extremely high brand loyalty – global pet food/care and global premium coffee (led by Nestlé’s globally leading Nespresso)…” (Click here to see the full text)
You can also take a look at China Crackdown is Crushing These 10 Stocks and 10 Dividend Growth Stocks to Buy.
Follow Insider Monkey on Twitter
- Kevin Oram’s Praesidium Investment’s Top Stock Picks: ServiceNow, Wix, and More
- 10 Top Tech Stocks to Buy Today According to Brad Gerstner’s Altimeter Capital Management
- 10 E-commerce and Tech Stocks to Buy Now According to Christopher Lyle’s SCGE Management
This article is originally published at Insider Monkey.
