Philip Morris International Inc. (PM): Are Hedge Funds Lighting Up This Stock?

Philip Morris International Inc. (NYSE:PM) made some headlines Wednesday when it announced an agreement to buy a 20-percent stake in Russian distributor firm Megapolis for about $750 million, according to reports. Megapolis is the Russia distributor for Philip Morris International Inc., wich is the second-largest world market for cigarettes.  With the news, Philip Morris International Inc. said the deal, which may close by year’s end, should boost earnings per share as early as the March quarter of 2014. While that may seem like good news, how do some of the world’s savviest investors – those who run multi-billion-dollar hedge funds – fel about the company and the stock? Let’s take a deeper look.

Philip Morris International Inc. (NYSE:PM) investors should be aware of an increase in support from the world’s most elite money managers of late. PM was in 57 hedge-fund portfolios at the end of September. There were 55 hedge funds in our database with PM holdings at the end of the previous quarter.

Philip Morris International Inc. (NYSE:PM)

Hedge fund activity in Philip Morris International Inc.

In preparation for this quarter, 57 of the hedge funds we track were long in this stock, an increase of 4 percent from one quarter earlier. With hedge funds’ capital changing hands, there exists an “upper tier” of notable hedge fund managers who were increasing their stakes meaningfully.

According to hedge fund experts at Insider Monkey, Gardner Russo & Gardner, managed by Tom Russo, holds the most valuable position in Philip Morris International Inc. (NYSE:PM). Gardner Russo & Gardner has a $832.7-million position in the stock, comprising 8.8 percent of its 13F portfolio. Sitting at the No. 2 spot is Adage Capital Management, managed by Phill Gross and Robert Atchinson, which held a $415.1-million position; 1.2 percent of its portfolio is allocated to the company. Remaining hedge funds with similar optimism include Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Jim Simons’ Renaissance Technologies and Ken Griffin’s Citadel Investment Group.

Now, key hedge funds were leading the bulls’ herd. Sprott Asset Management, managed by Eric Sprott, initiated the most outsized call position in Philip Morris International Inc. (NYSE:PM). Sprott Asset Management had $73 million invested in the company at the end of the quarter. Clint Carlson’s Carlson Capital also made a $16.8-million investment in the stock during the quarter. The following funds were also among the new PM investors: Thomas Lenox Kempner’s Davidson Kempner, Peter Muller’s PDT Partners, and Anand Parekh’s Alyeska Investment Group.

What do insiders think about Philip Morris International Inc.?

Insider purchases made by high-level executives is best served when the primary stock in question has experienced transactions within the past half-year. Over the last six-month time period, Philip Morris International Inc. (NYSE:PM) has seen two unique insiders buying, and five insider sales (see the details of insider trades here).

Let’s go over hedge-fund and insider activity in other stocks similar to Philip Morris International Inc. (NYSE:PM). These stocks are Vector Group Ltd (NYSE:VGR), Lorillard Inc. (NYSE:LO), Reynolds American, Inc. (NYSE:RAI), Altria Group Inc (NYSE:MO), and British American Tobacco PLC (ADR) (NYSEAMEX:BTI). All of these stocks are in the cigarette industry and their market caps resemble PM’s market cap.

Company Name # of Hedge Funds # of Insiders Buying # of Insiders Selling
Vector Group Ltd (NYSE:VGR) 11 0 1
Lorillard Inc. (NYSE:LO) 21 0 5
Reynolds American, Inc. (NYSE:RAI) 19 0 3
Altria Group Inc (NYSE:MO) 39 0 2
British American Tobacco PLC (ADR) (NYSEAMEX:BTI) 12 0 0

SAs you can see, Philip Morris International Inc. (NYSE:PM) is by far the favorite among this sector in terms of hedge-fund position, but it is consistent in tems of its perception among insiders, with buys and sells not out of the ordinary. Information from these two stakeholders can provide retail investors with valuable insight with any stock, including Philip Morris International Inc.


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