Rough day for tobacco stocks after Lorillard premium vaporizes

Tobacco stocks slump as a group after Lorillard doesn't catch the premium in the Reynolds American buyout that some anticipated.

Even Imperial Tobacco which ended up with the hot Blu e-cigarette brand as part of the deal is having trouble shaking off the pessimism.

Decliners: Lorillard (NYSE:LO) -7.9%, Philip Morris (NYSE:PM) -1.3%, Altria (NYSE:MO) -2.1%, Vector Group (NYSE:VGR) -0.8%, Reynolds American (NYSE:RAI) -4.0%, Imperial Tobacco (OTCMKTS:ITYBY) -2.8%, British American Tobacco (NYSEMKT:BTI) -1.4%.

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Comments (19)
  • The Dividend Bro
    , contributor
    Comments (753) | Send Message
    Bought more for my mom's portfolio today. Long run, fewer cig companies means ability to raise prices.
    15 Jul 2014, 11:52 AM Reply Like
  • A Newell
    , contributor
    Comments (508) | Send Message
    Yes, a buying opportunity for sure.
    15 Jul 2014, 12:01 PM Reply Like
  • glf4mny
    , contributor
    Comments (464) | Send Message
    The shorters are getting creamed today
    15 Jul 2014, 02:01 PM Reply Like
  • Dennis Tikkanen
    , contributor
    Comments (155) | Send Message
    getting creamed? all the tobacco stocks are in the red for the day with LO down over 10%.
    15 Jul 2014, 04:32 PM Reply Like
  • stockpicker99
    , contributor
    Comments (105) | Send Message
    I am really confused! The deal looks like win-win to me.Based on my calc. one stock of LO ($61.00) will give you $50.50 plus 0.2909X RAI($60.00) or $68.50.
    Can any one explain to me if I'm wrong?
    15 Jul 2014, 02:34 PM Reply Like
  • Bobco23
    , contributor
    Comments (240) | Send Message


    As of 3:30 PM I get a value of the deal (cash + RAI) at $67.82. LO is at $60.88. This current price is better than a 10% discount to the deal price. I suspect those hoping for a bigger price are selling and dragging the marginal price lower, which begets more selling and a lower marginal price.


    Just back of the envelope, if this deal takes six months to close and RAI stays about where it is, then the annualized return is in the 24% area (10% from the LO today price to the closing deal price time 2 (to annualize 6 months) plus roughly a 4% dividend annual yield.


    I have too much already invested in tobacco stocks, but buying more LO looks like a sure winner to me. I am buying on the close.
    15 Jul 2014, 03:32 PM Reply Like
  • misterbonin
    , contributor
    Comments (8) | Send Message
    Do you know when the deal will be in effect? Like when does LO will be trading as RAI? Thanks
    15 Jul 2014, 05:19 PM Reply Like
  • joegillam
    , contributor
    Comments (1168) | Send Message
    I just don't know. I got a bunch of MO and it has been good to me, sill way up after today. But cigarettes are slowly going out of style, even in third world countries. The tobacco companies have been trying to branch out into other areas, but is it enough and fast enough? Is it time to take the money off the table?
    15 Jul 2014, 03:16 PM Reply Like
  • trex678
    , contributor
    Comments (68) | Send Message
    Probably not. Mo has faced headwinds in the past and always comes back
    and more. Everytime I got scared out I had to buy back in at a higher price
    then I sold it for. Less then a month ago it was $41.13. Im way ahead and
    will likely hold this one the rest of my life.
    15 Jul 2014, 03:26 PM Reply Like
  • Marty D.
    , contributor
    Comments (8) | Send Message
    Have owned Altria for about 20 years, wil buy more when dividend approaches
    4.9 to 5.0 percent
    15 Jul 2014, 04:19 PM Reply Like
  • cardinallen
    , contributor
    Comments (102) | Send Message
    I like the 5 % too.
    15 Jul 2014, 06:12 PM Reply Like
  • Nyoka
    , contributor
    Comment (1) | Send Message
    Great retirement investment. Dividends are great and continued for 43 years. Bought all I could afford in 2009.
    15 Jul 2014, 08:51 PM Reply Like
  • Dan Terry
    , contributor
    Comments (37) | Send Message
    This is one of those rare opportunities that only come along once in a blue moon - You can buy a sure thing, like you are getting free money. Have no idea why the LO shares fell below the buyout price today.. I have researched everything over, correct me if I missed something.. None the less I stocked up on LO today for sure and will buy more tomorrow, the more I buy the more $ I make. Plus a solid company, not a tech spec play etc.
    15 Jul 2014, 09:23 PM Reply Like
  • DHL-2
    , contributor
    Comments (508) | Send Message
    VGR has held up the best of all. Highest DIV too.
    15 Jul 2014, 10:06 PM Reply Like
  • Scenic Dr
    , contributor
    Comments (297) | Send Message
    Not when you look at VGR's high PE and payout ratio. Don't get me wrong...I like the company, but this is one that needs to be watched. Eventually all that long term debt they've taken on to be able to be as generous as they've been is going to come home to roost. Hopefully their real estate arm will continue to be profitable.
    16 Jul 2014, 05:14 AM Reply Like
  • DHL-2
    , contributor
    Comments (508) | Send Message
    Well, I was in error because the decline (-0.8%) cited in the header to the article was also incorrect. My E-Trade account showed a -2.2% decline on the day, not 0.8%


    Re the dividend, I am not worried. VGR has a very long standing history of paying that .40 per quarter, even during the dark days of 2008-2009 (where it was dropped by a few cents). It is a management priority on every conference call I have listened to. Even when some institutional investors (banks) were urging VGR to cut dividends and buyback stock to prop up the stock price, management wisely refused.


    I am not buying any at the current price levels. If it ever gets back down to under $17, then perhaps.
    16 Jul 2014, 04:24 PM Reply Like
  • Anasazi101
    , contributor
    Comments (3369) | Send Message
    Well with a 6% to 10% (or close) correction on some of these Companies..
    I sensed it as a "buying opportunity", and is exactly what we did..
    Seems to me most fundamentals, cash flows and dividends are still pretty much in place..? Unless I missed something terribly wrong..??


    long RAI, MO, PM..
    16 Jul 2014, 02:02 PM Reply Like
    , contributor
    Comments (7) | Send Message
    lawsuit against directors of LO due to not shopping around for buyer
    17 Jul 2014, 09:21 AM Reply Like
    , contributor
    Comments (7) | Send Message
    Keep in mind that MO owns the retail counters in the United States. If you doubt this - look at all retail outlets........


    Reynolds will not make in roads against mo.


    No doubt that Reynolds will profit from combined sales force....
    17 Jul 2014, 09:22 AM Reply Like
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