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A manager known for smoking out solid undervalued stocks set fire to his

Philip Morris

(MO)

stake in the third quarter.

Bill Nygren disclosed that he sold the mid-cap value

(OAKMX)

Oakmark fund's long-standing stake in tobacco concern Philip Morris in a letter to shareholders posted on the fund's

Web site Friday morning. Nygren, who has made his name at the helm of

(OAKLX)

Oakmark Select fund since 1996, inherited the large and high-profile stake in the embattled shop when he

replaced Robert Sanborn on the Oakmark fund in March.

His reason for selling his Philip Morris shares: He and co-manager Kevin Grant felt Philip Morris'

Kraft

business made the stock worth more than $30, despite the government's popular and well-known antitobacco

jihad

. When the stock hit their price target, they sold -- the stock's highest closing price during the third quarter was $33.88 on Aug. 15, according to

Morningstar

.

The stock, a former outsize position and top holding in the fund under Sanborn, had weighed the fund down in recent years. The fund and the stock averaged a 2% annual loss over the past three years. Like

many other Sanborn picks, though, the stock has seen better days since the manager stepped down. It's up more than 43% through Thursday's close.

The Oakmark fund rose 6.1% in the third quarter, compared with a 1.2% loss for the

S&P 500. Over the past three years the Oakmark Select fund boasts a 16.9% annualized return that tops 95% of its mid-cap value peers and beats the S&P 500 by more than 1.6 percentage points annually. Henry Berghoef became a co-manager in March.

Nygren, who historically chose different stocks from the firm's buy list than Sanborn, also added the following stocks to the Oakmark fund's portfolio: retailer

JC Penney

(JCP)

, telecommunications behemoth

AT&T

(T)

, machinery shop

Rockwell International

(ROK)

, drugstore chain

CVS

(CVS)

and auto titan

Ford

(F)

.