The Marlboro Man And Big Mac

| About: Altria Group, (MO)

His name was Clarence Hailey Long. His 1949 photograph in Life magazine was seen by a high-powered advertising executive, and the Marlboro Man was created. There were many others after Clarence and as a small boy, I worshiped them all. That granite-jawed face, that steely stare, that cigarette dangling insolently from the lips; what wasn't to like? I'd strap on my six-shooter, doff my cowboy hat and climb on my horse. By the way, my horse's name was Schwinn. Humming the Marlboro theme song, I'd ride to the local store and buy a pack of those candy cigarettes. Each candy smoke had one end tinted red, neat huh? I'd stick one of those things in my mouth, drape my arms nonchalantly over my handlebars, (oops) I mean over my saddle-horn, and survey my surroundings with jaded, squinting eyes. I was eight years old and already had been hooked on cigarettes; I just didn't know it yet.

In this country, the Marlboro Man has long since ridden into the sunset. But in the rest of the world, and to China in particular, he has reappeared in one form or another.

Tune into Chinese television and watch the "Asian Marlboro" road racing competition. Also in China, Philip Morris International (NYSE:PM) sponsors giveaways where people trade in empty cigarette packages for goodies branded with the Marlboro logo. And Philip Morris isn't alone. One local brand called 555 has pretty young women giving away cigarettes to patrons entering popular discos in Beijing. In Hong Kong, Salem sponsors a tennis tournament. In Sri Lanka, British American Tobacco (BAT) hires young women to hand out free heaters to students on college campuses. Everybody wants to get into the act!

And now, if you'll indulge me, back to my childhood. I'm being honest when I say that I remember the Sunday Dad, Mom and I piled into the old Buick and drove 50 miles to eat at a place called McDonald's (NYSE:MCD). I was the first one to see the golden arches. I had heard about them from a friend, so I had kept a close watch. If I remember correctly, the banner below the arches proclaimed 50 million sold. Yes, that's right, million. It was a long time ago. The atmosphere inside the place was different, almost exciting. Never before had my folks and I seen food served and sold like this. French fries in a little paper bag! The food must have been okay, I guess. I mean it was quick and cheap. How good did it really have to be?

Walk into your local McDonald's and look around. There's probably some sort of play area for the little ones. If you're really lucky, the play area will be behind closed doors allowing you to watch the screaming bedlam without having to listen to it. Young mothers sit and munch salads while their little ones navigate intricately designed plastic obstacle courses. There might be a toddler at Mom's elbow, gumming a fry and gazing wistfully at the fun being had in the playroom. Sooner or later the mother's children will rejoin her. They will be hungry, thirsty and tired. She will feed them and take them home. They will nap. Yes, they will nap.

I took a look at how the shares of these two companies have fared in the past few years. It was interesting.

If you'll recall, Philip Morris became Altria (NYSE:MO) in 2003. Altria spun out Kraft Foods (KRFT) in 2007 and in 2008, Philip Morris was booted from the nest. I 'd like to start with 2008, the first full year of PM's independent reporting.

In 2008 Philip Morris International made a profit of $3.32 a share. 2012 saw earnings of $5.17 per share. PMI paid a dividend of $1.54 a share in 2008. The dividend in 2012 was $3.40 a share. Revenues have grown from $25.7 billion in 2008 to over $31 billion this last year. Full-year forecasts for 2013 are around $5.70 a share in earnings.

The attitude toward smoking is hardening in Europe and PM's European sales figures reflected that. That downdraft, however, was more than mitigated by the sales increase in Russia, Turkey and China. When you consider the sheer volume of people living in the emerging countries of the world, it's easy to see how Philip Morris has barely scratched the surface in terms of penetration.

In March, 2008, PM started trading at a little over $50 a share. At yesterday's closing, the stock fetched a little over $90. A nice return. Throw in the dividends, and the return looks even better.

In 2008, McDonald's earnings came in at $3.60 a share. The company earned $5.36 per share in 2012. MCD's dividend in 2008 was $1.63 for each share. By 2012, the dividend had grown to $2.87 a share. Revenues went from $23.5 billion in 2008 to $27 billion in 2012. Next year's revenues are expected to grow between 4% and 6%.

In fiscal 2013, McDonald's plans to spend $3.5 billion not only opening 1600 new restaurants, but also remodeling 1600 others worldwide. There's a long, long way to go before the word saturation enters into the McDonald's conversation. Again, as with Philip Morris, emerging market revenues overshadowed slowing European sales.

McDonald's shares brought a little over $54 a share in 2008. They now trade for nearly $96. As with PM, reinvested dividends paint an even brighter picture.

If you had invested $10,000 in Philip Morris five years ago you would be sitting on over $21,000 today. A similar investment in McDonald's would have grown to nearly $20,000. The three-year total return for PM is 26.97%. MCD's three-year score is 17.58%.

Here are two companies, in disparate industries, employing similar methods to move their respective products. Not to sell them mind you, but to move them.

Philip Morris sells an illusion. Many of the qualities you desire are there for the taking. Independence, self-reliance, sophistication, desirability, and anything else you want to imagine about yourself is at your fingertips. All you have to do is buy the magic wand and strike a match.

McDonald's sells something a bit more substantial; convenience and fun mixed with a little daycare. This isn't a bad combination and it moves a lot of mediocre food.

Both of these stocks would make a solid contribution to any portfolio. I own one in a mutual fund. I can't bring myself to buy the other.

One last thought before you begin your own research. Isn't Altria a pretty name? It stirs thoughts of a distant land where gauzy-gowned maidens traipse through meadows of wildflowers. More illusion.


Disclosure: I am long MCD. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.