With the third-quarter round of 13F filings behind us it is time to take a look at the stocks in which some of the best money managers in the world preferred to invest or sell heading into the fourth quarter. One of these stocks was Philip Morris International Inc. (NYSE:PM).
Is PM a good stock to buy now? Philip Morris International Inc. (NYSE:PM) investors should be aware of a decrease in hedge fund interest lately. Philip Morris International Inc. (NYSE:PM) was in 50 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistics is 60. There were 53 hedge funds in our database with PM positions at the end of the second quarter. Our calculations also showed that PM isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
According to most investors, hedge funds are perceived as slow, old financial vehicles of yesteryear. While there are greater than 8000 funds trading at the moment, Our experts look at the elite of this group, approximately 850 funds. It is estimated that this group of investors handle most of all hedge funds’ total capital, and by tracking their first-class equity investments, Insider Monkey has determined several investment strategies that have historically outpaced the S&P 500 index. Insider Monkey’s flagship short hedge fund strategy exceeded the S&P 500 short ETFs by around 20 percentage points per annum since its inception in March 2017. Our portfolio of short stocks lost 13% since February 2017 (through November 17th) even though the market was up 65% during the same period. We just shared a list of 6 short targets in our latest quarterly update .
At Insider Monkey we scour multiple sources to uncover 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 and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 5 best cheap stocks to buy according to Ray Dalio to identify stocks with upside potential. 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 website. Now we’re going to take a gander at the new hedge fund action encompassing Philip Morris International Inc. (NYSE:PM).
What does smart money think about Philip Morris International Inc. (NYSE:PM)?
At the end of the third quarter, a total of 50 of the hedge funds tracked by Insider Monkey were long this stock, a change of -6% from the previous quarter. On the other hand, there were a total of 60 hedge funds with a bullish position in PM a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Philip Morris International Inc. (NYSE:PM) was held by Cedar Rock Capital, which reported holding $744.2 million worth of stock at the end of September. It was followed by Gardner Russo & Gardner with a $618.6 million position. Other investors bullish on the company included Ariel Investments, Citadel Investment Group, and GQG Partners. 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 16.93% of its 13F portfolio. Gardner Russo & Gardner is also relatively very bullish on the stock, earmarking 6.01 percent of its 13F equity portfolio to PM.
Due to the fact that Philip Morris International Inc. (NYSE:PM) has witnessed bearish sentiment from hedge fund managers, we can see that there was a specific group of hedge funds who sold off their positions entirely in the third quarter. It’s worth mentioning that Renaissance Technologies dumped the largest investment of the “upper crust” of funds followed by Insider Monkey, valued at an estimated $21.2 million in stock, and Ryan Caldwell’s Chiron Investment Management was right behind this move, as the fund said goodbye to about $9.5 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest was cut by 3 funds in the third quarter.
Let’s also examine hedge fund activity in other stocks similar to Philip Morris International Inc. (NYSE:PM). We will take a look at Honeywell International Inc. (NYSE:HON), International Business Machines Corp. (NYSE:IBM), BHP Group (NYSE:BBL), American Tower Corporation (NYSE:AMT), Lockheed Martin Corporation (NYSE:LMT), Anheuser-Busch InBev SA/NV (NYSE:BUD), and PetroChina Company Limited (NYSE:PTR). This group of stocks’ market values match PM’s market value.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 32.9 hedge funds with bullish positions and the average amount invested in these stocks was $1391 million. That figure was $2639 million in PM’s case. American Tower Corporation (NYSE:AMT) is the most popular stock in this table. On the other hand PetroChina Company Limited (NYSE:PTR) is the least popular one with only 6 bullish hedge fund positions. Philip Morris International Inc. (NYSE:PM) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for PM is 66.3. 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 positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 31.6% in 2020 through December 2nd and beat the market again by 16 percentage points. Unfortunately PM wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on PM were disappointed as the stock returned 4.1% since the end of September (through 12/2) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.