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Hedge Funds Are Quitting Altria Group Inc (MO)

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  • MO

Most investors tend to think that hedge funds and other asset managers are worthless, as they cannot beat even simple index fund portfolios. In fact, most people expect hedge funds to compete with and outperform the bull market that we have witnessed in recent years. However, hedge funds are generally partially hedged and aim at delivering attractive risk-adjusted returns rather than following the ups and downs of equity markets hoping that they will outperform the broader market. Our research shows that certain hedge funds do have great stock picking skills (and we can identify these hedge funds in advance pretty accurately), so let’s take a glance at the smart money sentiment towards Altria Group Inc (NYSE:MO).

Altria Group Inc (NYSE:MO) was in 45 hedge funds' portfolios at the end of the third quarter of 2021. The all time high for this statistic is 54. MO investors should be aware of a decrease in activity from the world's largest hedge funds of late. There were 47 hedge funds in our database with MO positions at the end of the second quarter. Our calculations also showed that MO isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings).

Michael Platt Bluecrest Capital Management
Michael Platt Bluecrest Capital Management

Michael Platt of BlueCrest Capital Mgmt.

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so 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. Now let's check out the latest hedge fund action regarding Altria Group Inc (NYSE:MO).

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

At Q3's end, a total of 45 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -4% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards MO over the last 25 quarters. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is MO A Good Stock To Buy?
Is MO A Good Stock To Buy?

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Renaissance Technologies has the most valuable position in Altria Group Inc (NYSE:MO), worth close to $126.7 million, corresponding to 0.2% of its total 13F portfolio. The second largest stake is held by Ken Griffin of Citadel Investment Group, with a $119.8 million call position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Other hedge funds and institutional investors with similar optimism include Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital, John Overdeck and David Siegel's Two Sigma Advisors and Phill Gross and Robert Atchinson's Adage Capital Management. In terms of the portfolio weights assigned to each position Plaisance Capital allocated the biggest weight to Altria Group Inc (NYSE:MO), around 5.2% of its 13F portfolio. Callodine Capital Management is also relatively very bullish on the stock, setting aside 4.54 percent of its 13F equity portfolio to MO.

Due to the fact that Altria Group Inc (NYSE:MO) has experienced declining sentiment from the smart money, logic holds that there exists a select few money managers that slashed their full holdings heading into Q4. It's worth mentioning that Benjamin A. Smith's Laurion Capital Management sold off the biggest investment of the "upper crust" of funds followed by Insider Monkey, comprising close to $21.5 million in call options, and Brad Dunkley and Blair Levinsky's Waratah Capital Advisors was right behind this move, as the fund said goodbye to about $10.3 million worth. These moves are intriguing to say the least, as total hedge fund interest fell by 2 funds heading into Q4.

Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Altria Group Inc (NYSE:MO) but similarly valued. These stocks are Brookfield Asset Management Inc. (NYSE:BAM), Mercadolibre Inc (NASDAQ:MELI), The Blackstone Group Inc. (NYSE:BX), PNC Financial Services Group Inc. (NYSE:PNC), Equinor ASA (NYSE:EQNR), Canadian National Railway Company (NYSE:CNI), and Mondelez International Inc (NASDAQ:MDLZ). This group of 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 BAM,32,2498829,-2 MELI,68,4371182,-6 BX,54,2545773,0 PNC,41,506241,3 EQNR,11,163324,0 CNI,42,7392349,2 MDLZ,46,1922079,-7 Average,42,2771397,-1.4 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 42 hedge funds with bullish positions and the average amount invested in these stocks was $2771 million. That figure was $830 million in MO's case. Mercadolibre Inc (NASDAQ:MELI) is the most popular stock in this table. On the other hand Equinor ASA (NYSE:EQNR) is the least popular one with only 11 bullish hedge fund positions. Altria Group Inc (NYSE:MO) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for MO is 57.8. 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 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 28.6% in 2021 through November 30th and beat the market again by 5.6 percentage points. Unfortunately MO wasn't nearly as popular as these 5 stocks and hedge funds that were betting on MO were disappointed as the stock returned -6.3% since the end of September (through 11/30) 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 many of these stocks already outperformed the market since 2019.

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