5 Best Stocks to Invest Your $1000 According to Reddit

4. Altria Group, Inc. (NYSE:MO)

Number of Hedge Fund Holders: 48

Altria Group, Inc. (NYSE:MO) makes and sells smokable and oral tobacco products in the United States. On July 28, the company released its earnings report for the second quarter of 2022. Earnings per share came in at $1.26, beating analysts’ estimates by $0.01. Revenue was $5.37 billion, which fell short of the market consensus by $48.2 million. On August 25, the company declared a quarterly dividend of $0.94 per share, a 4.4% increase from its prior dividend of $0.90. The dividend is payable on October 11, to shareholders of record on September 15. The forward yield was 8.18%. 

Jefferies analyst Owen Bennett reaffirmed a ‘Buy’ rating on Altria Group, Inc. (NYSE:MO) on July 25 but lowered the price target on the shares to $54 from $58. While acknowledging that Altria Group, Inc. (NYSE:MO)’s outlook is “increasingly challenged” as U.S. cigarette volumes are deteriorating, the analyst called the selloff in the stock “overdone” given his view that the market is pricing in the worst case scenario. The “only way” he sees risk of further de-rating from this point is if Altria Group, Inc. (NYSE:MO) renounces long-term growth to cater to dividends. Even in that case, a double-digit dividend yield can still be expected into 2028, the analyst added.

Among the hedge funds tracked by Insider Monkey, 48 funds were long Altria Group, Inc. (NYSE:MO) at the end of Q2 2022, compared to 47 funds in the previous quarter. Arrowstreet Capital is the leading stakeholder of the company, with 8.8 million shares worth $370 million. 

Here is what Broyhill Asset Management had to say about Altria Group, Inc. (NYSE:MO) in its Q2 2021 investor letter:

“Altria (MO) shook off the prospects of a ban on menthol and a potential cap on nicotine and gained 20%. We shared our thoughts on these regulations during the quarter, which are available here.

MO Valuation. MO is up ~ 18% YTD (even accounting for the recent sell-off). We expect MO to generate close to $5 in annual FCF per share over the next few years, putting the stock at ~ 10x, which is less than half the market’s multiple today. Over the last decade, shares have traded at an average multiple of 15x and within a range of ~ 10x – 20x (+/-1 standard deviation). The stock yields 7.2% at the current price, close to a 6% premium to treasuries. Historically, shares have traded closer to a 3% premium to the 10Y, which would imply a ~ $75 share price.”