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chang
Contributor ○○○

Where there's smoke ... is there fire?

Continuing the discussion that started on the VGR thread. As @Intruder trenchantly pointed out, tobacco in the US faces many and serious headwinds. I wouldn't even think of going there.

Internationally, though, it's another story. In Asia and the Middle East, smoking is actually very healthy (sorry). In Asia, especially with young men and women ... I should actually say boys and girls. In the Middle East, it's more men than women, and all ages ... and almost everyone. (Surprisingly, men and women alike in Israel smoke like chimneys.) Russia as well - boys and girls, men and women. We're talking about something like 6 billion people - quite a market!

I'm not so familiar with Latin America, but I would not be surprised is smoking is relatively widespread there as well.

Investing on this basis ... well, there's really only one choice, isn't there? PM. PM is exclusively non-US, while MO is exclusively US. BTI is global and the US is its biggest market. Everyone else is small potatoes.

PM is basically slightly-down to flat for the last 1, 3 and 5 years - see the chart. Why is the share price stagnant? The observations I have made are not new, they are ancient.

PM trades at P/E of 17.4 versus the S&P's mean of 15.76. That does not sounds like a good value. It was down 32% in 2018, and up 30% YTD. Maybe the simple fact is that I missed the boat on this.

https://finbox.com/PM says that 19 analysts put PM's fair value in the range $72-105 with a mean of $92.41 - a 10.4% upside. Finbox's models say $82-103. Trading now at $83.70.

PM's TTM yield is 5.48%, so even if the stock price doesn't move - and if the dividend is safe (???) - it would not be a bad holding. Speaking of dividends, VGR just slashed its dividend in half yesterday.

PM just crossed its 200dma (upward) a few weeks ago. Some people take that as a good sign.

Should I take a whiff with a "starter set" for fun and see how it goes? I might strike it lucky.

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28 Replies
racqueteer
Participant ○○○

Re: Where there's smoke ... is there fire?


@chang wrote:

 

I might strike it lucky.


A pun?  Not to cast a pall over same, but I suspect mall sales have been reduced as well (pun intended)!

It's an interesting thought, Chang, but one would think we'd have a clearer indication of gains overseas than have been demonstrated?  Do they have competition we're not considering?

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CarlosDS
Participant ○

Re: Where there's smoke ... is there fire?

Well selling drugs is always a lucrative bussines so you could make some money there. 

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Intruder
Participant ○○○

Re: Where there's smoke ... is there fire?

From what I have read foreign governments are more tolerant on smoking, eg. Fewer restrictions on smoking in public places and no govt media ads showing results of smoking to audiences. I don’t know if there is an EU equivalent of the US surgeon generals 1964 report on smoking.

Since only about 5% of my investments are in foreign stocks I don’t worry about EU regulation of tobacco.

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ECEPROF
Explorer ○○○

Re: Where there's smoke ... is there fire?

India has put a lid on smoking. I think that Indian supreme Court has upheld many of the restrictions. So, it is a law. Cops can even arrest people if anyone smokes in public places or streets. So, that is 1.2 billion less.

It will get worse for smokers in India because the supreme Court has come heavily on the governments yesterday on the polution control and levied a fine on burning. So, that becomes a law.

 

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chang
Contributor ○○○

Re: Where there's smoke ... is there fire?


@ECEPROF wrote:

India has put a lid on smoking. I think that Indian supreme Court has upheld many of the restrictions. So, it is a law. Cops can even arrest people if anyone smokes in public places or streets. So, that is 1.2 billion less.

It will get worse for smokers in India because the supreme Court has come heavily on the governments yesterday on the polution control and levied a fine on burning. So, that becomes a law.


1.2 billion less? That's a bit optimistic. 

Wiki says: "Smoking in public places was prohibited nationwide from 2 October 2008. There are approximately 120 million smokers in India. According to the World Health Organization (WHO), India is home to 12% of the world’s smokers. According to a 2002 WHO estimate, 70% of adult males in India smoke. Among adult females, the figure is much lower at between 13–15%. About 90% of children under the age of 16 years have used some form of tobacco in the past, and 70% are still using tobacco products. As of 2015, the number of men smoking tobacco in India rose to 108 million, an increase of 36%, between 1998 and 2015."

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chang
Contributor ○○○

Re: Where there's smoke ... is there fire?


@racqueteer wrote:

It's an interesting thought, Chang, but one would think we'd have a clearer indication of gains overseas than have been demonstrated?  Do they have competition we're not considering?


My question exactly. Why haven't PM shares done better the last 5-10 years? What am I missing?

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Highlighted
chang
Contributor ○○○

Re: Where there's smoke ... is there fire?


@CarlosDS wrote:

Well selling drugs is always a lucrative bussines so you could make some money there. 


Is that a dig? Name a publicly traded company not vulnerable to some social criticism.

Smokers smoke because that's their choice. Not even a hermit living in a cave in Tibet doesn't know that smoking causes lung cancer. There will always be a certainly percentage of the human race that are complete idiots. It's not the responsibility of everyone else not to sell them what they want.

I'm not at all sure that fast food and junk food don't kill more people than tobacco, if you consider heart disease and diabetes.

I have always said that "ESG", "SRI" etc. is a joke, because what is "E" or "S" is in the eye of the beholder. I wouldn't have the slightest hesitation investing in tobacco, junk food, casinos, oil and gas, guns and weapons, genetically modified seeds, big banks, etc. There is actually only one kind of company that, in my opinion, commits true and horrifying crimes against Nature, which I would never invest in, and it isn't any of those.

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denots
Follower ○○

Re: Where there's smoke ... is there fire?

I bought PM back in 2009-ish when they first split MO & PM, based on your exact theory - billions of smokers in foreign markets.  As you can see, it never really panned out as a growth investment, although the fat dividends were a plus.  I sold a couple of years ago and consolidated that holding into an unrelated ETF.  It could still be a hold today though if you are looking for yield and don't mind that it never has had a growth boom in price during one of the best bull markets ever.  I just decided to move on.

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ElLobo
Participant ○○

Re: Where there's smoke ... is there fire?

VGR yields 7.19%

MO currently yields 7.5%

PM is at 5.75%

BTI yields 7.72%

.The efficient market, SPY, yields 1.81%.

Who cares what these guys did over the last 100 years that each of them have been paying a divey.  Who cares where their share prices are headed, or why.  Sit back, ifn you are retired, light up a De Nobili, play some bocce, live off the cash machine.

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chang
Contributor ○○○

Re: Where there's smoke ... is there fire?


@ElLobo wrote:

Who cares where their share prices are headed, or why. 


El, I can't go along with that. Even if your approach is technically sound, I will struggle to retain my bien-être if I see the value of my holding go down, even if the yield correspondingly rises and even if (assuming!) the dividend is safe. 

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ElLobo
Participant ○○

Re: Where there's smoke ... is there fire?


@chang wrote:

@ElLobo wrote:

Who cares where their share prices are headed, or why. 


El, I can't go along with that. Even if your approach is technically sound, I will struggle to retain my bien-être if I see the value of my holding go down, even if the yield correspondingly rises and even if (assuming!) the dividend is safe. 


In the alternative, you're trying to predict whether or not share prices are going to rise or not.  There's nothing you can do about it.  You can't even count on doing any kind of FF3/5F factor analysis, and 'value investing' DD.  Although true, it isn't worth much, as you point out, to know the divey yield increases whenever the share price falls.  What's important is whether or not the dollar amount of the divey stays the same, is cut, or increases.

(And it does make a difference whether you  are an accumulator or a decumulator!) 8-))

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Gary1952
Contributor ○○

Re: Where there's smoke ... is there fire?

It is probably a losing battle to have tobacco be a growth vehicle. I googled some articles and it appears that Asia is the priority target for the world anti-tobacco movement. I saw crazy things like a prominent scientist being recruited to repudiate links between smoking and health. No wonder they need to steal our technology.

I read that in much of Asia cigarette production is controlled by the government. China is the largest producer. That article was older but I don't see China giving cigarette production away. A newer article says China produces 42% of the world's cigarettes.

Not many bright lights for investing in tobacco.

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DJANG0
Explorer ○

Re: Where there's smoke ... is there fire?

Noticed a new ETF, ACT, which is booze, smokes, and pot if you're interested in diversified investments in human misery. I'll note, VICEX, the original mutual fund for bad boy behavior with additional investments in strip clubs, porn, and gambling has not done well.

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ElLobo
Participant ○○

Re: Where there's smoke ... is there fire?


@DJANG0 wrote:

Noticed a new ETF, ACT, which is booze, smokes, and pot if you're interested in diversified investments in human misery. I'll note, VICEX, the original mutual fund for bad boy behavior with additional investments in strip clubs, porn, and gambling has not done well.


ACT yields 1.56%, less than the market yield.  I can't find the symbol VICEX.

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racqueteer
Participant ○○○

Re: Where there's smoke ... is there fire?


@Gary1952 wrote:

China is the largest producer. That article was older but I don't see China giving cigarette production away. A newer article says China produces 42% of the world's cigarettes.


And therein may lie the problem about which Chang (and I) were wondering!  Home field advantage, tariffs, and all that?

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DJANG0
Explorer ○

Re: Where there's smoke ... is there fire?


@ElLobo wrote:

@DJANG0 wrote:

Noticed a new ETF, ACT, which is booze, smokes, and pot if you're interested in diversified investments in human misery. I'll note, VICEX, the original mutual fund for bad boy behavior with additional investments in strip clubs, porn, and gambling has not done well.


ACT yields 1.56%, less than the market yield.  I can't find the symbol VICEX.


VICEX is the correct symbol, but the fund name has been changed to USA Mutuals Vice Investor. 

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ElLobo
Participant ○○

Re: Where there's smoke ... is there fire?


@DJANG0 wrote:

@ElLobo wrote:

@DJANG0 wrote:

Noticed a new ETF, ACT, which is booze, smokes, and pot if you're interested in diversified investments in human misery. I'll note, VICEX, the original mutual fund for bad boy behavior with additional investments in strip clubs, porn, and gambling has not done well.


ACT yields 1.56%, less than the market yield.  I can't find the symbol VICEX.


VICEX is the correct symbol, but the fund name has been changed to USA Mutuals Vice Investor. 


OK, now it pops up in Yahoo!  Stupid computer.  TTM yield for it is 0.33%.  Don't hold sin for income, it seems! 8-))

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chang
Contributor ○○○

Re: Where there's smoke ... is there fire?

Anyone care to suggest an entry price for PM?
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racqueteer
Participant ○○○

Re: Where there's smoke ... is there fire?

I'm not much of a chartist, but it looks to me as if it has been mostly sideways for YEARS and has failed at the current level several times.  I'm also a little concerned about that short peak from about 2016-2017; looks like an attempted breakout which failed quite spectacularly!  Maybe a short-term trade at $70-ish?

I'm not seeing a lot of reason to rush into that trade, Chang.  What's your thinking (beyond the hope that the 'new' markets in Asia MIGHT catch on)?  Even there, I might be more inclined to go with a local competitor (if I could).

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