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Don't Miss The Altria Bull Market

Apr. 07, 2021 10:25 AM ETAltria Group, Inc. (MO)BTI, PM117 Comments


  • Two months ago, I suggested that Altria would rise to $50 this year.
  • This has happened, and Altria has become a trending stock.
  • It is still considerably undervalued, and sentiment seems to be turning.
  • Looking for a portfolio of ideas like this one? Members of The Dividend Freedom Tribe get exclusive access to our model portfolio. Learn More »

President Obama Announces Janet Yellen As His Choice To Chair Federal Reserve
Photo by Chip Somodevilla/Getty Images News via Getty Images

Written by Robert Kovacs


I remember an interesting tidbit of information from when Ben Bernanke, the chair of the Fed from 2006 to 2013, was nominated to the position over 15

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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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Comments (116)

wward001 profile picture
Mary Jane is MO's ace in the hole! The Government is going to Federally Legalize Marijuana sales to be deposited into the Banking system. Before the Senate right now. And I don't see the Government relying on Mom and Pop Pot grower for their tax revenue. This will be handled by MO and BTI. Have a nice day.
I do not smoke but own MO, PM, BTI. A tobacco shop near me has MO's products
front and center, especially JUUL. BTI advertises VUSE products on TV. It is well done.
mikemarshall profile picture
I own a Vanguard's consumer staples fund, VDC, it has made a nice run the past month, which bodes well for MO. The recent sector rotation has also helped, as investors have moved into value and out of growth, MO get captured here too. I have a small position in my income portfolio, and as a defensive play. Good luck.
Orangejulius profile picture
I owned MO back in mid-2017 after their first big fall for around $64 a share. After it became clear they were going to keep falling and were entering a serious bear market, I closed out at $55 in mid 2018.

It became clearly overvalued in late 2014 and reverted to mean in 2018, (PE 14) so I should have expected that.

I hate loses, but this stock had the hallmarks of continued declines. Turns out I was right. The market often overshoots with corrections.

I told myself I was done with MO when I saw it nosedive year after year. But when it hit the $30s, it became too hard to resist. In the middle of 2020, I started a new position in the low $40s and watched for a double bottom. I actually doubled down on the stock in the $30's in late September while out on my honeymoon in Yellowstone. (Amazing, beautiful national treasure!)

I decided that once it broke into the $50s, it's getting close to fair value. This stock needs a risk premium due to the industry it operates in. I consider 12-13x OCF to be fair, and 15x too rich. I think we'll see serious resistance in the $58-$65 range, with $63 being my price target in one year. Continued growth in the ranges of 4-6% are expected for the next 5 years, so combined with the dividend, (~5.4% at $63) that should be a nice double digit return.

Don't expect MO to make you rich quick here, but it should be a good income and total return pick.
@Orangejulius I've had similar experience with MO, BTI and PM. When they got out of favor, they dropped like rocks. It made me think the market knew something I didn't know. I sold out at reasonable prices, and I didn't think I would ever get involved again. But the prices were just too cheap, the dividends too high, and there were so many recommendations from a variety of advisors that I concluded volatility and extended down moves in price don't necessarily mean the stock is not investable. Will it be different this time? Who knows? Maybe we are in for a big bull run, but maybe not. In any event, I'm an owner of the three I mentioned, and I have all three of them at good prices.
@Orangejulius I'm not using MO to get rich, I'm using it to stay rich. Glad I moved all my T to MO in February.
Dividend Appreciator profile picture
Great article! Luckily I reinvested dividends throughout 2020. But of course I should have levered up and bought a bunch more🤷🏼‍♂️ On reactions I’ll buy more. It’s been hard buying this through its bear market and feels so good now that it is contributing both to dividend income and capital gains!
rlmod profile picture
My timing was terrible when I purchased this at $64 back in November 2017 and I’m not jumping back in to recoup. I can only take so many punches in the gut. My gut feeling is to get out if it ever does reach my purchase price and be thankful for the dividends. Good luck to anyone wanting to get in.
@rlmod I did the same thing. I have reinvested the dividends and now have a cost basis of $57. I also bought more in the low $40s. I’m planning on losing this a long time and reinvesting the dividends until I retire (another 25 years). We’ll see. Good luck!
JMS89 profile picture
MO is one of the best future cannabis plays going IMO.
Petrichor78 profile picture
Yes. PM has the advantage (I think) to benefit from US dollar weakness.
Investing in MO is helping to kill far more people then Covid did.

Every year die about 8 million people because of tobaccosmoking (source WHO)

From Covid in 1 year only about 2,5 million people and that will soon be over, after the vaccination is finished.

Fortunately it is forbidden in a lot of places to smoke and less people smoke nowadays, it is a dying and very filthy business, in contrary to what the people paid by the Tobacco-maffia say or write.
@grandmasterc I agree with everything you said except the first sentence. If I didn't purchase any stock in MO do you think less people would smoke? BTW I quit smoking in 1992 and wish I had never started.
@grandmasterc Oh and we didn't even shut the country down!
08 Apr. 2021
@grandmasterc And this has what to do with finance? You’re on the wrong forum.
Great article and been following MO awhile and even bought at the 31.00 range. Long MO
Thanks Author
4Logos profile picture
investors beware!

Govt's around the world are seeking to control your health...and your freedoms!

480K each year, according to that well trusted source the CDC, die each year from smoking or second hand smoke

My whole family smoked...I was an athlete so opted out, and they all died a natural death so far, so I have no ax to grind on smoking or tobacco
like most

I even owned MO and because I like the business model

But think through this, please...

Socialism in healthcare (HC) means managing costs...cancer treatment is a HUGE burden on the HC system, and govt's know that

If they can herd us into vaccines and now travel visa's based on an upgraded flu virus, guess what comes next to the BK world govt's as they manage their "populations" who like sheep willingly comply and believe anything post COVID

Increase taxes/regulation at a minimum...who know from there what goofy ideas they come up with, excuse the expression, snuff this out!
@Lost in America Well, hopefully we won't get any closer to socialism in healthcare for awhile. The majority of Americans I believe understand that the media is lying to them about almost everything, certainly about government controlled healthcare. Let's see how it goes.
4Logos profile picture
@networks_insider sure hope you are right...but the "majority" is increasingly at ease with being on the govt tit, one way or another...and the democrats have a strategy to increase their voter base which is based on dependency / govt programs to make their life better

Increase taxes and aggressive redistribution here we come!
@4Logos I don't believe your story, unless you call a death by cancer or heartattack a normal death, which is often caused by smoking.
I have seen so many people coughing, hardly be able to breath and dying under 60 years because of heavy smoking (i.e. Steve McQueen) . almost every smoker comes with a fake story that his granny or other family member became 120 despite smoking. Addicts usually always deny their addiction and the effects of that and put their head in the sand like an ostrich.
Shakespeare is a boring hack, but props for the informative article and Voltaire reference.
Great article. One question. In your example of what the return would be if you invested $10K at the current price, you suggest reinvesting the dividend once per year. Why once per year? Why not reinvest the dividend each time it is distributed (each quarter)? Is there an advantage of only reinvesting once per year? Am I missing something? Thank you.
Robert & Sam Kovacs profile picture
@The Reasonable Man No advantage, in fact you have a compounding edge reinvesting as often as possible.
Simply I wrote code for a back of napkin calculation, and it made my life easier to just lump the dividends into one payment at the end of the year.
Happy investing.
@Robert & Sam Kovacs thank you! Same to you Keep up the good work.
Cuip99 profile picture
Yes, I am long in MO (and PM). Great dividend generators. MO is also big in wine and beer. And it has significant Marijuana holdings in Canada. I predict the Biden administration will legalize Marijuana sooner or later, just a matter of the right time.
verbalsensei profile picture
Great informative article, long time MO shareholder here. The dividend is always impressive, the new technology is exciting, predicting an upward trend and dividend as well. Regards.
Robert & Sam Kovacs profile picture
@verbalsensei Thanks for reading.

Happy investing
ArtfulDodger profile picture
Fellow Investors:

Beware as to what will inevitably come at "Big Tobacco."

Tobacco has been a soft target for the left when they're in charge of the government. As I've written several times this year, as in the past, you can look for this Administration to attack every business in one way or the other, in the end to get more money out of them.

Right off we saw an attack on drillers and frackers, that is, "Big Oil." Now, it's "Big Tech" and "Big Pharma."

In the latest tax plan we see them flailing away at both tech and pharmaceuticals. See this article and many more covering the planned carnage:
“The Party Does Seem Like It’s Over”: Biden Tax Plan To Hit Tech And Pharma Hardest

In the end it won't matter. It's where they can find money. That will definitely include tobacco. So then, at least recognize this when putting your investing funds in tobacco stocks, even though they are more diversified than ever.

Me the uneducated investor bought MO at 24 years ago- and now?? Jeekers!!! very nice
@benny22 Me's like you. Bought years ago in high teens.
Started MO around $50, bought more on the way down, lowest $38.50. Average basis $47. Love this stock. Long MO. 560 shares DRIPing. Planning to add more.
I am long MO, PM, BTI. I wish them all well.
Convoluted profile picture
I jumped on MO put spreads a few weeks ago when it was sub 40. Is it too late?

Well, it won't be quite the slam dunk, but combining a few short calls might be good insurance.

Actually, I would look at BTI. I started a LEAP put spread about 2 weeks ago. How's it doing? It's now in good form-meaning that the short put decay is exceeding the decay of the long puts (measured in absolute dollars). The longer term spreads are often slow to settle into a pattern. So, be patient. It's possible for the underlying to trade well above your short strike, and the spread will seem unresponsive-even slightly negative. This can happen on a down day, even when one would expect gains on the spread. Remember that IV can change the dynamics-even for a spread that's been clicking along in a textbook fashion.

And, you probably know that decay will accelerate as time to expiration gets closer. The early months require a lot of patience-especially where the underlying is quite volatile. MO and BTI have rather low IV, however.
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