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Smoking is Healthy

|Includes: Lorillard, Inc. (LO), MO, PM, RAI

By Roger Nachman

It's that most demonic of vices, with smoking being one of the leading causes of death each year in America. Yet it seems, Americans can't get enough it.

This morning Lorillard Inc. (NYSE:LO) reported earnings that blew away estimates from Wall Street. It reported Q3 earnings of $1.81, 17 cents better than analysts' expectations. Revenues also rose to $1.07 billion, better than the $1.01 billion Wall Street was looking for.

Smoking may not be healthy for you, but it's quite apparent that it's quite healthy for your portfolio. Stocks like Altria (NYSE:MO), Philip Morris (NYSE:PM), and Reynolds American (NYSE:RAI) have seen tremendous inflows this year, and are at or right near 52 week highs.

With strong market share, especially Altria's Marlboro, and enormous dividends, investors have been flocking to these stocks like a moth to a flame.

The biggest one of the bunch is PM, which sells Marlboro around the world, and does not have any regulatory issues from countries around the world.

The domestic tobacco companies have legal issues, but given the legal environment as of late, investors might consider going with the known legal issues, as opposed to seeing legal issues crop up out of nowhere.

There has been plenty of concern from owning tobacco and sin stocks, as investors try to become more socially responsible, which could weigh on shares. Additional unforeseen legal issues from the U.S. could also weigh on shares, but tobacco appears the way to go this year.

Smoking has become sexy again, with the likes of 'Mad Men' continuing to have strong rating. Investors might be wise to add some tobacco to their portfolios.

Disclosure: long MO

Disclosure: long MO