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British American Tobacco: Largely Immune To AI And A Smoking Good Deal

Ordinary Wealth profile picture
Ordinary Wealth


  • Leading tobacco companies are largely immune to impacts from AI.
  • BTI is trading at very low valuations with an adjusted operating earnings yield of 14.24% and price to book of 0.797.
  • BTI is experiencing solid growth from ex-US jurisdictions, new categories products, and its stake in ITC Ltd., but currency effects are somewhat disguising the growth.
  • BTI has the qualities that we look for in a defensive stock to hold through recession.

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What does AI have to do with a tobacco company? Well, a lot actually. Artificial intelligence has taken the investing landscape by storm since ChatGPT was launched last November. Investors have been preoccupied with AI concepts; busy investigating how AI

This article was written by

Ordinary Wealth profile picture
Publishes articles on our research and investment portfolio decisions. Focusing on macro economics, total return, dividend growth, and options. Not investment advice. "A picture is worth a thousand words, but a chart is worth a thousand pictures."

Analyst’s Disclosure: I/we have a beneficial long position in the shares of BTI either through stock ownership, options, or other derivatives. 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.

The content in this article is for informational, educational, and entertainment purposes only. This content is not investment advice and individuals should conduct their own due diligence before investing. The author is not an investment advisor, is not registered as a financial advisor, and is not suggesting any investment recommendations. This article is not an investment research report but a reflection of the author’s opinion and own investment decisions based on the author’s best judgement at the time of writing and are subject to change without notice. The author does not provide personal or individualized investment advice or information tailored to the needs of any particular reader. Readers are responsible for their own investment decisions and should consult with their financial advisor before making any investment decisions. No statement or expression of opinion, or any other matter herein, directly or indirectly, is an offer or the solicitation of an offer to buy or sell the securities or financial instruments mentioned. Any projections, market outlooks, or estimates herein are forward looking statements based upon certain assumptions that should not be construed as indicative of actual events that will occur. Any analysis presented is based on incomplete information, and is limited in scope and accuracy. The information and data in this article are obtained from sources believed to be reliable, but their accuracy and completeness are not guaranteed. The author expressly disclaims all liability for errors and omissions in the service and for the use or interpretation by others of information contained herein.

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 (39)

Picked up 500 shares after reading your great analysis. Already long MO and PM might as well add this dividend jewel that is in the bargain basement.
this stock is trading like a junk bond back to 32
I have a position in BTI and PM. Both are down, but both are attractive buys in my opinion. BTI is in my IRA, and PM is in my personal portfolio of stocks.
Tellurium128 profile picture
What if AI invents a cure for nicotine addiction? Or it might create a nicotine substitute.
Ordinary Wealth profile picture
@Tellurium128 anything is possible. What if ai creates a cure for hunger and people no longer need to eat.
BuyHoldSelectivelyReinvest profile picture
@Tellurium128 What if AI cures cancer?

Answer: Smoking can be enjoyed without fear of adverse health effects. That is to say, smoking is no longer a societal problem.
ContyC profile picture
The only regret I have with BTI is that it’s already one of my largest positions and I can’t add anymore because of concentration risk. Otherwise, it’s the best stock to buy in today’s market. Those who don’t own it should take advantage and build up their position.
Ordinary Wealth profile picture
@ContyC that is a common and frustrating regret. It's also why we are tepid in dollar cost averaging any position.
BeaBaggage profile picture
took a small position in $BTI when it fell below 34 and my avg cost is under 33 now. Bea
Go and do likewise profile picture
This popped up on my radar as well. I don't like the action this week with the pop and reversal. And, it is all the way back to Nov 2020 lows which I do not like at all. But, you could also see this as roughly trading in a range between 32 and 45 for nearly 5 years. So, seems like more upside than downside at this price. Given the added bonus of the div, I initiated a starter position today.
Good article with the exception of your statement that the Indian government might confiscate BTI's holdings of ITC. Not going to happen. Confiscation would be disastrous for the Indian government. Foreign investment in India would ground to a halt, and foreign companies would begin moving their investments out of the country.
Ordinary Wealth profile picture
@southbuckeye we agree it's an unlikely event but if it were to occur it would be a major setback
@Ordinary Wealth Has BTI ever mentioned selling the stake, or part of, in ITC if there continues to be this favorable runup? I guess there would be hefty taxes to be paid.

Possibly, with Modi, and other changes of thoughts in India, it is possible that the country can expand and become more market driven for years to come, understanding there are many hurdles from past conditioning.
gman1253 profile picture
I guess no one here has ever heard of Total Return.

1 yr = -21.9%
3 yr = 1.76%
5 yr = -2.09%
10 yr = .14%

Would have been better off with T-Bills....

People are dividend obsessed some times.
@gman1253 does that include dividend reinvestment?
purpleboarder profile picture
@gman1253 Are we ignoring dividends in Total Return? Are we ignoring re-invested dividends?

I don't deny the drop in in BTI's stock price. It was probably overvalued. Now it is extremely undervalued; which in turn has given us an insane dividend.

Do T-Bills raise their yield during maturation? No they don't. DGI companies raises their dividend payments fairly consistently.

I initiated a position in BTI in late Dec of '22. I'm down ~12%, and DRIPing the dividends. I will be purchasing more on a monthly basis, as long as the price is under $38. This is a long-term holding.

Long PM, BTI...

"Quality First, Valuation Second, Monitor Always"....
Ordinary Wealth profile picture
@gman1253 past performance...
Good article. Agree with your outlook. I'm building an over-weight position.
Nice article. Thank you. I agree. BTI is a strong buy here. I’m long BTI and MO. PM is also a great company but I’m waiting for it to pull back into the $80s.
@The Reasonable Man I don't think you will see PM in the 80s. Good Luck
@Boston Investor-617 I doubt it too but I’m hopeful. Best of luck to you.
Freedom Rocks profile picture
Great job. Long BTI!
hugh74jones profile picture
A well written article. I could not agree more, a BTI is my 2nd largest income stock, with MO the 1st. BTI had a nice 1 day rally on Weds, but it quickly fizzled out yesterday (Thurs). Entry point for newcomers in BTI is right now, up to 35- 36.
@hugh74jones Couldn't agree more. BTI and MO long-term holder here. My non-investment grade brain says BTI is a bargain under 35.
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