2. Philip Morris International Inc. (NYSE:PM)
Number of Hedge Fund Holders: 55
Dividend Yield as of May 30: 4.67%
Gardner Russo & Gardner’s Stake Value: $658,103,000
An American multinational tobacco company, Philip Morris International Inc. (NYSE:PM) was the seventh-largest holding of Gardner Russo & Gardner at the end of Q1 2022. The hedge fund owned over 7 million shares in the company, worth over $658 million, which accounted for 6.33% of Tom Russo’s portfolio.
As per Insider Monkey’s Q1 2022 database, 55 hedge funds reported owning stakes in Philip Morris International Inc. (NYSE:PM), valued at over $6.6 billion. In the previous quarter, 47 hedge funds owned a collective stake worth over $6.1 billion in the company. Among these hedge funds, GQG Partners was the largest shareholder of the New York-based company in Q1 2022, owning roughly 30 million shares, valued at over $2.8 billion.
In March, Philip Morris International Inc. (NYSE:PM) announced a quarterly dividend of $1.25 per share, in line with its previous dividend. The company has been raising its dividend ever since becoming a public company in 2008. As of May 30, the stock’s dividend yield was recorded at 4.67%.
Broyhill Asset Management mentioned Philip Morris International Inc. (NYSE:PM) in its Q2 2021 investor letter. Here is what the firm has to say:
“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.’”
