UBS tells investors to "stay the course" with select tobacco stocks, based on a favorable...

UBS tells investors to "stay the course" with select tobacco stocks, based on a favorable climate for the sector. Analyst Nik Modi picks out Altria (MO +1.3%) as "our #1 pick" on the strength of its cheap valuation and an expected stabilization of the Marlboro brand. Just a notch below, he lines up Lorillard (LO +0.7%) as the "best fundamental story," although he cautions investors to wait out an FDA decision on menthol science before buying.
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Comments (4)
  • tigersam
    , contributor
    Comments (1707) | Send Message
    Next 10 years all these companies will run out of business. When China and India stop smoking there will not be any demand.
    5 Jan 2012, 03:36 PM Reply Like
  • coolguy82
    , contributor
    Comments (49) | Send Message
    I'm sure somebody said exactly the same thing in 2000....
    5 Jan 2012, 05:55 PM Reply Like
  • jelrod3
    , contributor
    Comments (129) | Send Message
    Keep a sharp eye out for further indications that the FDA intends to ban the use of menthol in tobacco products.


    The drumbeat to do exactly this is reverberating, as the anti-tobacco group are saying that menthol cigarettes are a "gateway" for youth to take up smoking, and have a "racial bias" since they are preferred by African-Americans and Hispanic smokers.


    Here is a link to an updated viewpoint on why menthol tobacco products should be banned


    This viewpoint is being advanced solely for social reasons, not scientific reasons, as there is no evidence that menthol in cigarettes is per se dangerous, or that mentholated cigarettes are more dangerous or harmful than non-mentholated cigarettes.


    A ban on menthol by the FDA would destroy LO's stock price. 90% of LO's revenues come from mentholated cigarettes.
    10 Jan 2012, 01:17 PM Reply Like
  • jelrod3
    , contributor
    Comments (129) | Send Message
    The anti-tobacco folks are working hard to get tobacco banned from all possible places. I ran across this post concerning their efforts in Nebraska.


    Eventually, these efforts have got to take a toll on domestic tobacco revenues and profits. The international export trade may be the saving grace for those owning tobacco stocks for their dividend payouts.


    I'm long MO, LO, PM, and RAI in various portfolios... but am keeping a watchful eye on LO and the FDA.
    12 Jan 2012, 04:35 PM Reply Like
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