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I'm searching for good investments to make in 2013. In this article, we'll take a look at Reynolds American Inc. (NYSE:RAI). We'll take a look at Reynolds' historical share price performance as well as its financial performance. Also, we'll evaluate Reynolds from the perspective of a technical analyst.

We'll use descriptive statistics by taking a sample of the population of monthly returns of Reynolds American. At this point, we won't make any statistical inferences. Some of the sample statistics will include the arithmetic time-series mean, and the time-series median. Also, we'll take a look at a histogram of nominal monthly returns. We'll also discuss the absolute frequencies, relative frequencies and cumulative relative frequencies of the return profile. Further, we'll determine the geometric mean return and the modal interval. The sample will consist of monthly returns between 2000 and January 2013.

Readers should note that the selected sample contains two bull markets and two bear markets. Further, the sample contains both high interest rate and low interest rate environments.

The arithmetic time-series mean monthly nominal return was 2 percent. The time-series median monthly nominal return was 2 percent.

One of the nominal monthly returns was between -30 percent and -25 percent. Eleven of the nominal monthly returns were between -10 percent and -5 percent. Twenty-eight of the nominal monthly returns were between -5 percent and 0 percent. Fifty-two of the nominal monthly returns were between 0 percent and 5 percent. Thirty-six of the nominal monthly returns were between 5 percent and 10 percent. Twenty-one of the nominal monthly returns were 10 percent or greater.

About 18 percent of the nominal monthly returns were between -5 percent and 0 percent. Further, 33 percent of the nominal monthly returns were between 0 percent and 5 percent. A little over three percent of the nominal monthly returns were between -15 percent and -10 percent. Finally, 23 percent of the nominal monthly returns were between 5 percent and 10 percent.

That said, 30 percent of the nominal monthly returns were between -30 percent and 0 percent. That means the other 70 percent of the nominal monthly returns were 0 percent or higher. The modal interval was 0 percent to 5 percent.

The time-series geometric mean nominal monthly return or time-series nominal monthly compound growth rate was 2 percent. The nominal geometric mean monthly return on a bond equivalent basis was 24 percent. The nominal geometric mean monthly return on an effective annual yield basis was 26.8 percent.

We'll make a statistical inference about the population geometric mean nominal monthly return. The population geometric mean nominal monthly return at 95 percent confidence, assuming a standard normal distribution, was between 3.4 percent and 0.6 percent.

Reynolds' nominal monthly return distribution was positively skewed and mesokurtic.

Next, we'll compare some of those sample statistics with the sample statistics of the S&P 500 between 2000 and 2012.

The arithmetic time-series mean monthly nominal return on the S&P 500 was 0.1 percent. The time-series median monthly nominal return on the S&P 500 was 1 percent.

The geometric time-series mean nominal monthly return or time-series nominal monthly compound growth rate on the S&P 500 was 0 percent. I'm sure you can calculate the nominal bond equivalent yield and nominal effective annual yield on the S&P: It was 0 percent.

Thus, Reynolds American Inc. outperformed the S&P 500 between 2000 and 2012.

The sample standard deviation of nominal monthly returns on Reynolds was 9 percent. The sample standard deviation of monthly returns on the S&P 500 was 5 percent.

Reynolds' total revenue grew at a nominal annual compound growth rate of 6 percent between 2003 and 2011.

Reynolds' net income grew at a arithmetic average annual growth rate of 12 percent between 2003 and 2011.

Reynolds' dividend per share increased at a nominal annual compound rate of 9 percent between 2006 and 2011.

Lorillard's (NYSE:LO) total revenue grew at a nominal compound annual growth rate of 10 percent between 2004 and 2011.

Lorillard's net income grew at a nominal compound annual growth rate of 8 percent between 2004 and 2011.

Lorillard's dividend per share increased at a nominal annual compound rate of 7 percent.

Lorillard's top line is growing faster than Reynolds', but Reynolds is growing the bottom line and dividend faster.

Since at least 2003, the firm has grown faster than the economy. However, sales and net income appreciated at a slower pace than the share price.

Professional investors should monitor the firm's financial performance and financial position as Reynolds could continue to outperform the broader market.

The firm was valued at 2.82 times sales and 15.85 times trailing earnings.

Altria was valued at 2.64 times sales and 16.61 times trailing earnings.

Lorillard was valued at 2.28 times sales and 13.77 times trailing earnings.

Reynolds is valued at a premium compared to its peers, but the growth rate could justify the premium.

As of writing, the dividend yield was 5.64 percent. Also, the debt to equity ratio was 0.67.

The quick ratio was 0.55 and the current ratio is 0.74. Reynolds had a market cap. of roughly $23B.

Technical Analysis

(click to enlarge)

Shares of Reynolds are trading near the flattening 50-day simple moving average. The market for shares of Reynolds may be beginning an intermediate-term correction. That said, the shares of the firm should re-test the $45 zone.

The MACD is forming a negative divergence with the share price of Reynolds on the weekly chart as the 14-day slow stochastic forms a bearish crossover following a brief stint in the overbought zone.

Also, the broader market remains in a Dow theory bull market.

Finally, the Dow Jones industrial average and S&P 500 are trading above the 50-day simple moving average.

Disclaimer: This article is not meant to establish or continue an investment advisory relationship. Before investing, readers should consult their financial advisor. Christopher Grosvenor does not know your financial situation and ability to bear risk and thus his opinions may not be suitable for all investors.

Source: Why Investors Should Accumulate Shares Of Reynolds American