Was The Smart Money Right About Philip Morris International Inc. (PM)?

We at Insider Monkey have gone over 887 13F filings that hedge funds and prominent investors are required to file by the SEC The 13F filings show the funds’ and investors’ portfolio positions as of December 31st. In this article, we look at what those funds think of Philip Morris International Inc. (NYSE:PM) based on that data.

Is Philip Morris International Inc. (NYSE:PM) the right investment to pursue these days? Investors who are in the know were buying. The number of bullish hedge fund bets advanced by 2 lately. Philip Morris International Inc. (NYSE:PM) was in 52 hedge funds’ portfolios at the end of December. 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 Q4 rankings).

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 124 percentage points since March 2017 (see the details here). That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

FAIRHOLME (FAIRX) Bruce Berkowitz

Bruce Berkowitz of Fairholme (FAIRX)

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best hydrogen fuel cell stocks to pick the next Tesla that will deliver a 10x return. 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 we’re going to take a peek at the latest hedge fund action encompassing Philip Morris International Inc. (NYSE:PM).

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

At the end of the fourth quarter, a total of 52 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 4% from the third quarter of 2020. The graph below displays the number of hedge funds with bullish position in PM over the last 22 quarters. With the smart money’s capital changing hands, there exists a select group of notable hedge fund managers who were upping their holdings meaningfully (or already accumulated large positions).

The largest stake in Philip Morris International Inc. (NYSE:PM) was held by Fundsmith LLP, which reported holding $1611.8 million worth of stock at the end of December. It was followed by Cedar Rock Capital with a $771 million position. Other investors bullish on the company included Gardner Russo & Gardner, Ariel Investments, and Citadel Investment Group. 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 16.67% of its 13F portfolio. Gardner Russo & Gardner is also relatively very bullish on the stock, setting aside 6.31 percent of its 13F equity portfolio to PM.

As one would reasonably expect, specific money managers were breaking ground themselves. LMR Partners, managed by Ben Levine, Andrew Manuel and Stefan Renold, initiated the most valuable position in Philip Morris International Inc. (NYSE:PM). LMR Partners had $16.4 million invested in the company at the end of the quarter. Brian Scudieri’s Kehrs Ridge Capital also made a $15.3 million investment in the stock during the quarter. The following funds were also among the new PM investors: Paul Tudor Jones’s Tudor Investment Corp, Bruce Berkowitz’s Fairholme (FAIRX), and Peter Algert’s Algert Global.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Philip Morris International Inc. (NYSE:PM) but similarly valued. We will take a look at Citigroup Inc. (NYSE:C), Starbucks Corporation (NASDAQ:SBUX), Sony Corporation (NYSE:SNE), Wells Fargo & Company (NYSE:WFC), Morgan Stanley (NYSE:MS), Sanofi (NASDAQ:SNY), and The Boeing Company (NYSE:BA). 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
C 95 7120499 4
SBUX 67 4990840 1
SNE 28 593971 2
WFC 99 8748819 9
MS 66 5665191 -4
SNY 15 1145189 -5
BA 55 1057323 12
Average 60.7 4188833 2.7

View table here if you experience formatting issues.

As you can see these stocks had an average of 60.7 hedge funds with bullish positions and the average amount invested in these stocks was $4189 million. That figure was $4427 million in PM’s case. Wells Fargo & Company (NYSE:WFC) is the most popular stock in this table. On the other hand Sanofi (NASDAQ:SNY) is the least popular one with only 15 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 55. 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 10 most popular stocks among hedge funds returned 90.7% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 35 percentage points. These stocks gained 13.6% in 2021 through April 30th and still beat the market by 1.6 percentage points. A small number of hedge funds were also right about betting on PM as the stock returned 16.3% since the end of the fourth quarter (through 4/30) and outperformed the market by an even larger margin.

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