A Top U.S. Pension Manager Bought Up Philip Morris Stock
A manager of one of the top-funded U.S. state public pensions recently disclosed major changes in its investment portfolio.
The Tennessee Department of Treasury, which oversees the state’s financial operations, dramatically increased its investment in tobacco giant
International (ticker: PM) stock, and slashed positions in
General Electric (GE),
The agency disclosed the trades, among others, in a form it filed with the Securities and Exchange Commission. The treasury department declined to comment on the trades.
Of the more than $82 billion in assets that the agency manages, $53.3 billion were assets of the Tennessee Consolidated Retirement System fund as of June 30, 2020.
The TCRS, as the pension is known, has been fully funded every year since 1972. That’s not typical for state pensions. A 2020 study by the Pew Charitable Trusts using 2018 data found that the average state pension was 70.7% funded, meaning having 70.7 cents for every dollar of obligation.
The Tennessee treasury bought 473,350 more Philip Morris shares to end the second quarter with 1.57 million shares. Philip Morris stock rose 19.7% in the first half of 2021, and so far in the third quarter has gained 2.3%. For comparison, the
S&P 500 index
rose 14.4% in the first half, and so far in the third quarter has gained 3.4%.
In July, Philip Morris reported a mixed second quarter, but announced a new stock-buyback plan. Earlier this month, the company was in a bidding war to acquire Vectura, a UK.-based inhaler maker.
The state agency lopped off a quarter of its stake in GE stock by selling 1.33 million shares to end June with 4.11 million shares of the conglomerate. GE stock soared 24.6% in the first half, and so far in the third quarter has slipped 7.1%. Those figures are for GE stock on a pre-split basis. The company recently had a 1-for-8 reverse split, a rare event for a large company included in the S&P 500.
CEO Larry Culp wanted the reverse split so that GE stock would be more in line with peers, which have triple-digit prices. Second-quarter earnings, reported in late July, were strong. Culp told us recently that he’s optimistic for “a nice run of economic growth” once the initial postpandemic period is over.
Lilly stock jumped 35.9% in the first half, and so far in the third quarter has gained 18.0%.
Lilly shares have been boosted by hopes for its Alzheimer’s drug donanemab, but some skepticism has crept in. The second-quarter report earlier this month was mixed, but Lilly stock rose, anyway. Last week, the company created neuroscience and immunology business units.
The agency cut a quarter of its holding in Lilly stock, selling 132,084 shares to end June with 391,781 shares.
Tennessee’s treasury liquidated most of its investment in Baker Hughes stock by selling 957,791 shares to end the second quarter with 312,010 shares of the oil-field-services firm. Baker Hughes stock rose 9.7% in the first half, and so far in the third quarter it has slipped 10.7%.
In May, Goldman Sachs noted that some energy-services stocks, including Baker Hughes, could do well even if drilling activities remained muted. Baker Hughes’ second-quarter report in July was mixed. We noted that recently Baker Hughes has been trimming its stake in artificial-intelligence firm
Inside Scoop is a regular Barron’s feature covering stock transactions by corporate executives and board members—so-called insiders—as well as large shareholders, politicians, and other prominent figures. Due to their insider status, these investors are required to disclose stock trades with the Securities and Exchange Commission or other regulatory groups.