Fayez Sarofim’s Philip Morris Investment

Fayez Sarofim is a Houston-based investor that I occasionally cover on the blog because he is someone other than Warren Buffett and Charlie Munger that has seen his fortune climb on the coattails of buying-and-holding consumer stock investments. Coke, Nestle, McDonald’s–you name it–he bought it decades ago and holds it on the balance sheet of his Fayez Sarofim & Co. today.

After I published my recent article on Philip Morris International’s recent stock performance, Sarofim’s firm crossed my mind because I know that Philip Morris International (PM) is the investment that catapulted his own way from poverty in Egypt to a gilt-edged life of material success in the United States. To date, Sarofim finds himself sitting on 16,711,214 shares of PM stock.

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Philip Morris International Stock: The Poor Recent Performance

The disparity between reported results at Philip Morris International and the underlying economic reality of this tobacco business is on my mind again.

Aside from the usual moral reasons, it has become unfashionable due to its slow earnings growth during the past three years that has been met with low dividend growth as well. Profits of $4.76 per share back in 2014 are actually down a bit to $4.55 right now. The quarterly dividend payout has only grown from $1 to $1.02 to $1.04 over the same time frame. On a P/E basis, it looks like Philip Morris International is trading at almost 20x earnings while profits aren’t even growing.

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