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Altria: Stop Worrying About What's Gone Wrong And Think About What Can Go Right

Feb. 11, 2019 1:51 AM ETAltria Group, Inc. (MO)PM132 Comments
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Healthy Wealth Coach


  • Skepticism over equity purchases of Juul and Chronos, as well as fears about menthol bans, have driven Altria’s share price to 5-year lows.
  • There is no evidence that the company’s earnings power is impaired, and a streak of 53 dividend increases in 49 years is certain to continue.
  • Altria’s share price already reflects enormous amounts of pessimism. It’s time to think about what can happen if things go well.

Most investors don't respond well to negative headlines or negative price action. When they see headlines that a company they own has potentially made a huge error or faces serious problems and they see the value of their shares decline, they panic. They tend to believe the worst. Often they sell, or at the very least, they fail to take advantage of what could be a wonderful buying opportunity. Altria (NYSE:MO) is no doubt facing such an environment right now.

Everyone has now convinced themselves that Altria's $12.8 billion investment in Juul is a disaster. Everyone expects that the FDA will ban menthol cigarettes. Everyone thinks that smoking rates will go to zero. Everyone thinks Altria overpaid for its 45% stake in Chronos. No one seems to think that the company has a future.

If I truly believed these things, I'd sell too. Fortunately, I've been investing for too many decades. I've been there to witness Altria and Philip Morris (PM) being attacked by Bill Clinton, by angry jurors who awarded tens of billions in punitive damages in lawsuits that made front-page headlines. I've seen Altria trade with a dividend yield so high that one could buy them and not even care if the price ever rose again. I've also been there to watch Altria maneuver these problems, typically buying back its undervalued shares through the entire process, and absolutely increasing its dividend every year like clockwork. So, with the stock price where it is, I wanted to begin this article by looking at some emotionless facts.

Fact #1: Even if menthol is banned, it will take years to play out.

The concerns about the FDA banning menthol cigarettes began to hit Altria's share price last fall when the FDA announced it was considering such a ban. Altria and others saw

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This article was written by

Healthy Wealth Coach profile picture
I am a value oriented, contrarian investor with almost 3 decades of experience in the stock market and fifteen years of experience investing in real estate. In the stock market I have found that the best investing opportunities occur when quality companies are priced for incredible stress or even complete failure by the ever manic-depressive Mr. Market. I find myself the most interested in companies when the market is overwhelmingly pessimistic towards them.

Analyst’s Disclosure: I am/we are long MO, PM. 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.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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