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If we are forced to let just two stocks in our current portfolio stay put for the next 10 years, it would be Coca-Cola (NYSE:KO) and Philip Morris (NYSE:PM). Picking one out of these two for the number one slot is a tough ask. But Philip Morris slightly edges out Coke (in our list) because of its higher dividend growth prospects, being a younger (independent) company.

This morning, PM cut its 2012 earnings estimates by about 10 cents, mainly because of currency exchange rates and slowing Europe sales (Big surprise eh?). But is that reason enough to push the stock down 3%, even considering the general market weakness? We do not think so. Instead, this could be the beginning of the buying opportunities many have been looking for, keeping the general European condition in mind. Let's look at some reasons why PM is a great pick anytime (especially right now and in the upcoming months.)

  • The expected EPS for fiscal 2012 is still at least $5.10 a share. Even an industry average PE of 19.95 would give PM a stock price of about $102. Wonder why PM's PE is lower than Altria's (NYSE:MO)!.
  • Do not get too disturbed with the 25 cent reduction in earnings per share because of this currency weakness. Not many remember that just last year, PM gained 19 cents a share because of currency exchange rates. These conditions are even more cyclical than the material stocks. Buy a good stock and the market would take care of itself.
  • This currency weakness is not affecting just PM. It's having an impact on bigger players like Procter & Gamble (NYSE:PG). But the last we checked, PG was not even down 1%. Can't think of any other reason than overreaction for PM being down more than 3%.
  • The upcoming dividend increase in September. Ever since the 2008 spin-off, PM has increased its dividends by an average of about 14%. Even the reduced earnings forecast is highly unlikely to prevent PM from obliging this September as well.
  • This company is just so intent on increasing shareholder value. Just check out this recent buyback announcement.
  • Remember, temporary bad news for a fundamentally strong company is good news for investors in the long run. Somewhere, Mr. Peter Lynch would be smiling.
  • It is still the best-known name in the international tobacco market.
  • And the company is not sitting on its laurels. It is continuously coming up with ways to further its growth in the future.
Source: Philip Morris: Pick Up When It's Not Hot