As we already know from media reports and hedge fund investor letters, many hedge funds lost money in fourth quarter, blaming macroeconomic conditions and unpredictable events that hit several sectors, with technology among them. Nevertheless, most investors decided to stick to their bullish theses and recouped their losses by the end of the first quarter. We get to see hedge funds' thoughts towards the market and individual stocks by aggregating their quarterly portfolio movements and reading their investor letters. In this article, we will particularly take a look at what hedge funds think about Philip Morris International Inc. (NYSE:PM).
Is Philip Morris International Inc. (NYSE:PM) the right pick for your portfolio? The smart money is in a pessimistic mood. The number of long hedge fund bets fell by 5 recently. Our calculations also showed that PM isn't among the 30 most popular stocks among hedge funds. PM was in 43 hedge funds' portfolios at the end of the first quarter of 2019. There were 48 hedge funds in our database with PM positions at the end of the previous quarter.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's flagship best performing hedge funds strategy returned 25.8% year to date (through May 30th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 40 percentage points since its inception (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
We're going to take a peek at the latest hedge fund action regarding Philip Morris International Inc. (NYSE:PM).
What have hedge funds been doing with Philip Morris International Inc. (NYSE:PM)?
At the end of the first quarter, a total of 43 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -10% from one quarter earlier. By comparison, 50 hedge funds held shares or bullish call options in PM a year ago. With hedgies' capital changing hands, there exists an "upper tier" of notable hedge fund managers who were upping their stakes meaningfully (or already accumulated large positions).
Among these funds, Gardner Russo & Gardner held the most valuable stake in Philip Morris International Inc. (NYSE:PM), which was worth $850.7 million at the end of the first quarter. On the second spot was Cedar Rock Capital which amassed $828.1 million worth of shares. Moreover, Citadel Investment Group, Diamond Hill Capital, and Ariel Investments were also bullish on Philip Morris International Inc. (NYSE:PM), allocating a large percentage of their portfolios to this stock.
Because Philip Morris International Inc. (NYSE:PM) has experienced declining sentiment from the entirety of the hedge funds we track, it's safe to say that there is a sect of hedge funds that slashed their entire stakes by the end of the third quarter. Intriguingly, George Soros's Soros Fund Management dumped the largest position of all the hedgies followed by Insider Monkey, worth about $39.4 million in stock, and Matthew Hulsizer's PEAK6 Capital Management was right behind this move, as the fund said goodbye to about $4.4 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest fell by 5 funds by the end of the third quarter.
Let's go over 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 NIKE, Inc. (NYSE:NKE), Adobe Systems Incorporated (NASDAQ:ADBE), Eli Lilly and Company (NYSE:LLY), and International Business Machines Corp. (NYSE:IBM). This group of stocks' market valuations are similar to PM's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position NKE,53,1767916,-8 ADBE,86,8965741,2 LLY,44,2163009,-3 IBM,46,2215447,-2 Average,57.25,3778028,-2.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 57.25 hedge funds with bullish positions and the average amount invested in these stocks was $3778 million. That figure was $3990 million in PM's case. Adobe Systems Incorporated (NASDAQ:ADBE) is the most popular stock in this table. On the other hand Eli Lilly and Company (NYSE:LLY) is the least popular one with only 44 bullish hedge fund positions. Compared to these stocks Philip Morris International Inc. (NYSE:PM) is even less popular than LLY. Hedge funds dodged a bullet by taking a bearish stance towards PM. Our calculations showed that the top 15 most popular hedge fund stocks returned 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Unfortunately PM wasn't nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); PM investors were disappointed as the stock returned -9.9% during the same time frame 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 13 of these stocks already outperformed the market so far in the second quarter.
Disclosure: None. This article was originally published at Insider Monkey.