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Over the past three decades, as shown by the chart below, investors in Altria Group (NYSE:MO) have done quite well. Simply put, MO has been a buy and hold investor's dream. However, I am currently cautious on the stock.

MO ChartMO data by YCharts

Stock Price Rally

Over the past three years, as shown by the chart below, shares of MO have moved higher by nearly 70% reaching a new all-time high. During this period, the S&P 500 is up just 41%. The move by MO is especially impressive when considering MO has a beta of just .45. Simply put, MO is due for, at the very least, a period of consolidation.

MO ChartMO data by YCharts

Valuation

As shown by the chart below, MO is now trading at the upper end of its historical valuation range and the highest level since its spinoff of Philip Morris International (NYSE:PM) in 2008. Given this, it is unlikely that MO is about to make another move higher anytime soon.

MO Forward PE Ratio ChartMO Forward PE Ratio data by YCharts

Smoking Popularity Decline

It is becoming increasingly apparent that smoking is on the decline in the U.S. While tobacco usage is down just slightly, it is possible that this trend accelerates in the coming years. This is, in my opinion, the greatest risk facing MO.

Heads I Win, Tails You Lose

If the stock market continues rallying to new highs, I would look for cyclical stocks to lead the way. Names such as U.S. Steel (NYSE:X), Caterpillar (NYSE:CAT), Nucor (NYSE:NUE), Alcoa (NYSE:AA), and JPMorgan (NYSE:JPM) that have lagged thus far. This move is likely to be fueled, at least in part, by selling in defensive names such as MO. Instead, if the stock market moves lower, I would not be surprised to see MO take a hit given the massive run over the past few years.

Conclusion

Given the recent rally, high valuation relative to historic norms, prospects of a declining smoking population in the U.S., and "heads I win, tails you lose" situation I am cautious on MO right now.

Source: Altria Group: Why I'm Cautious