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Altria Group Inc (MO): Are Hedge Funds Right About This Stock?

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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 have processed the filings of the more than 873 world-class investment firms that we track and now have access to the collective wisdom contained in these filings, which are based on their June 30th holdings, data that is available nowhere else. Should you consider Altria Group Inc (NYSE:MO) for your portfolio? We'll look to this invaluable collective wisdom for the answer.

Altria Group Inc (NYSE:MO) investors should pay attention to an increase in activity from the world's largest hedge funds of late. Altria Group Inc (NYSE:MO) was in 47 hedge funds' portfolios at the end of the second quarter of 2021. The all time high for this statistic is 54. Our calculations also showed that MO isn't among the 30 most popular stocks among hedge funds (click for Q2 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 79 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.

John Overdeck of Two Sigma
John Overdeck of Two Sigma

John Overdeck of Two Sigma Advisors

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, billionaire John Paulson is loading up on the miners, so we are checking out stock pitches like this mining stock. We go through lists like the 10 best EV 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 let's go over the new hedge fund action regarding Altria Group Inc (NYSE:MO).

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

At Q2's end, a total of 47 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 24% from the first quarter of 2020. On the other hand, there were a total of 43 hedge funds with a bullish position in MO a year ago. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in Altria Group Inc (NYSE:MO) was held by Arrowstreet Capital, which reported holding $165.1 million worth of stock at the end of June. It was followed by D E Shaw with a $156.6 million position. Other investors bullish on the company included Renaissance Technologies, Citadel Investment Group, and Citadel Investment Group. In terms of the portfolio weights assigned to each position Plaisance Capital allocated the biggest weight to Altria Group Inc (NYSE:MO), around 3.8% of its 13F portfolio. Callodine Capital Management is also relatively very bullish on the stock, dishing out 3.34 percent of its 13F equity portfolio to MO.

As aggregate interest increased, key hedge funds have jumped into Altria Group Inc (NYSE:MO) headfirst. Citadel Investment Group, managed by Ken Griffin, initiated the biggest call position in Altria Group Inc (NYSE:MO). Citadel Investment Group had $102.3 million invested in the company at the end of the quarter. Benjamin A. Smith's Laurion Capital Management also initiated a $21.5 million position during the quarter. The other funds with new positions in the stock are John Overdeck and David Siegel's Two Sigma Advisors, D. E. Shaw's D E Shaw, and Brad Dunkley and Blair Levinsky's Waratah Capital Advisors.

Let's now review hedge fund activity in other stocks similar to Altria Group Inc (NYSE:MO). These stocks are Fidelity National Information Services Inc. (NYSE:FIS), Mondelez International Inc (NASDAQ:MDLZ), NIO Inc. (NYSE:NIO), Gilead Sciences, Inc. (NASDAQ:GILD), General Motors Company (NYSE:GM), U.S. Bancorp (NYSE:USB), and Automatic Data Processing, Inc. (NASDAQ:ADP). All of these stocks' market caps are closest to MO's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position FIS,72,7369909,-2 MDLZ,53,2946868,8 NIO,34,2066911,6 GILD,54,1732734,-11 GM,86,7414862,0 USB,41,8305634,-2 ADP,41,3018791,-1 Average,54.4,4693673,-0.3 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 54.4 hedge funds with bullish positions and the average amount invested in these stocks was $4694 million. That figure was $949 million in MO's case. General Motors Company (NYSE:GM) is the most popular stock in this table. On the other hand NIO Inc. (NYSE:NIO) is the least popular one with only 34 bullish hedge fund positions. Altria Group Inc (NYSE:MO) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for MO is 48.6. 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 negative signal and we'd rather spend our time researching stocks that hedge funds are piling on. 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 29.6% in 2021 through November 5th and surpassed the market again by 3.1 percentage points. Unfortunately MO wasn't nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); MO investors were disappointed as the stock returned -3.5% since the end of June (through 11/5) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2021.

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