Here is What Hedge Funds Think About Philip Morris International Inc. (PM)

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 866 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of March 31st. In this article we look at what those investors think of Philip Morris International Inc. (NYSE:PM).

Is Philip Morris International Inc. (NYSE:PM) the right pick for your portfolio? Investors who are in the know were getting less bullish. The number of long hedge fund bets decreased by 4 in recent months. Philip Morris International Inc. (NYSE:PM) was in 48 hedge funds’ portfolios at the end of March. 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 Q1 rankings). There were 52 hedge funds in our database with PM holdings at the end of December.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Hedge funds have more than $3.5 trillion in assets under management, so you can’t expect their entire portfolios to beat the market by large margins. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 115 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds’ moves today.

Alex Litowitz Magnetar Capital

Alec Litowitz of Magnetar Capital

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation, which is why we are checking out this inflation play. We go through lists like 10 best gold stocks to buy to identify promising stocks. 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. With all of this in mind let’s view the latest hedge fund action surrounding Philip Morris International Inc. (NYSE:PM).

Do Hedge Funds Think PM Is A Good Stock To Buy Now?

At the end of the first quarter, a total of 48 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -8% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards PM over the last 23 quarters. With hedgies’ positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were adding to their holdings substantially (or already accumulated large positions).

Among these funds, Fundsmith LLP held the most valuable stake in Philip Morris International Inc. (NYSE:PM), which was worth $1720.5 million at the end of the fourth quarter. On the second spot was GQG Partners which amassed $929.6 million worth of shares. Cedar Rock Capital, Gardner Russo & Gardner, and Ariel Investments were also very fond of the stock, becoming one of the largest hedge fund holders of the company. 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 17.25% of its 13F portfolio. Gardner Russo & Gardner is also relatively very bullish on the stock, earmarking 6.56 percent of its 13F equity portfolio to PM.

Seeing as Philip Morris International Inc. (NYSE:PM) has witnessed declining sentiment from the smart money, it’s easy to see that there lies a certain “tier” of funds that elected to cut their positions entirely in the first quarter. It’s worth mentioning that Matthew Stadelman’s Diamond Hill Capital cut the largest investment of the “upper crust” of funds watched by Insider Monkey, valued at close to $78.1 million in stock, and Dmitry Balyasny’s Balyasny Asset Management was right behind this move, as the fund cut about $43 million worth. These transactions are interesting, as aggregate hedge fund interest fell by 4 funds in the first quarter.

Let’s now review hedge fund activity in other stocks similar to Philip Morris International Inc. (NYSE:PM). These stocks are Shopify Inc (NYSE:SHOP), Lowe’s Companies, Inc. (NYSE:LOW), Charter Communications, Inc. (NASDAQ:CHTR), JD.Com Inc (NASDAQ:JD), Royal Bank of Canada (NYSE:RY), Sony Corporation (NYSE:SNE), and AstraZeneca plc (NASDAQ:AZN). This group of stocks’ market values resemble PM’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
SHOP 91 9984457 1
LOW 61 5171876 -10
CHTR 74 16399220 -16
JD 75 11309916 -14
RY 18 716039 0
SNE 27 541868 -1
AZN 34 2660857 -7
Average 54.3 6683462 -6.7

View table here if you experience formatting issues.

As you can see these stocks had an average of 54.3 hedge funds with bullish positions and the average amount invested in these stocks was $6683 million. That figure was $5494 million in PM’s case. Shopify Inc (NYSE:SHOP) is the most popular stock in this table. On the other hand Royal Bank of Canada (NYSE:RY) is the least popular one with only 18 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 45.5. 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. 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 17.4% in 2021 through June 18th and still beat the market by 6.1 percentage points. A small number of hedge funds were also right about betting on PM as the stock returned 12.1% since the end of the first quarter (through 6/18) and outperformed the market by an even larger margin.

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Disclosure: None. This article was originally published at Insider Monkey.