TOBACCO STOCKS - UPDATE AND ANALYSES
INTRODUCTION
2023 is well into the 2nd quarter, and today we take a fresh look at tobacco stocks. We will look at a summary of the stocks’ performance since April 2021 and for 2023 year-to-date. My reports make no forecasts about tobacco stocks, but many of you are interested in their prospects. In the two years that these posts have been published, I have been fortunate to meet (virtually) several really great analysts who examine the companies in great detail.
TOBACCO STOCK PERFORMANCE
The five major tobacco companies have had negative returns during 2023. Only Japan Tobacco has had a positive return (including dividends). This year, the technology/growth has done well; the market appears to be looking ahead to a soft landing for the economy with the Federal Reserve slowing or stopping its interest rate increases.
Tobacco stocks have still outperformed the market over the last 1.6 years.
OUTLOOK
The “Nicotine Delivery” companies continue to generate cash flow and maintain price increases even as cigarette volumes decline. Most of their cash flow benefits shareholders with dividends and share buybacks. The current yield of the five companies averages 6%.
They all have entries in smokeless tobacco product category. Whether these new products will replace cigarettes with equal profitability remains to be seen. My long-term outlook is that demand for nicotine, with new products eventually replacing cigarettes, will continue for several decades, based on historical consumer behavior.
ANALYSTS
I follow several excellent tobacco stock analysts. They all provide detailed and informative reports on the tobacco companies. Unlike me, they are digging into the details of the tobacco businesses and the industry’s new products and consumer attitudes. Three of them are on my recommended list for their great writing in general as well as their detailed coverage of tobacco. Two others represent major investment companies in London and have followed the tobacco industry for years.
For those who want more detailed information about the outlook for the industry and for specific companies, I have included this reading list. Click on any article and you will find it on the internet.
Interview with Meb Faber -Outlook for Tobacco 12/08/2021
Assessing Altria and Tobacco Fundamentals 3/11/2023
Tobacco as a Defense Against Inflation 5/26/2021
British American Tobacco: A Great Divergence 5/21/2023
Altria: One More Step 4/30/2023
Philip Morris International: The High End of Low 4/23/2023
Altria Investor Day 2023 3/26/2023
Altria's NJOY Acquisition 3/19/2023
Changing Gears: A Shift in U.S. Tobacco Regulation 3/12/2023
Altria’s Investment History: Better Than You Think 3/5/2023
Philip Morris Int’l and British American: At the Forefront 2/12/2023
Altria: The Ultimate Balancing Act 2/5/2023
Altria: Completely Consumer-Driven 10/30/2022
Philip Morris International: IQOS Growth is No Illusion 10/23/2022
British American Tobacco: Analysis, Valuation, and Pricing 9/4/2022
Philip Morris International: Analysis, Valuation, and Pricing 8/7/2022
Altria: FDA’s Approach to Nicotine 6/23/2022
Altria: Analysis, Valuation, and Pricing 2022 6/13/2022
Philip Morris International: Market Share 5/21/2023
Philip Morris International: Comparing Markets 5/14/2023
Philip Morris International: Asia (+ Australia) 4/16/2023
Philip Morris Int’l: Middle East & Africa 3/5/2023
Philip Morris International: Europe 2/26/2023
Altria’s Market Share 2/29/2023
Cigarette Pricing + Demand 1/8/2023
OTHER ARTICLES
Nicotine Market Trends 2023-2030 4/27/23
Listening to Nicotine Users 9/1/2022
Global Tobacco Research on Safer Nicotine Products 6/17/2022
Global Tobacco and Nicotine Forum Seoul, Korea 9/19/2023
There are also the foreign stocks or local listings of international players e.g. BAT Kenya (NSE: BAT) exports around the region, Eastern Tobacco (EGX: EAST) are the makers of the Cleopatra brand of cigarettes which is one of the most popular cigarette brands in Egypt and is sold in nearly every country in Africa etc were covered in my last week's post: https://emergingmarketskeptic.substack.com/p/em-fund-stock-picks-commentary-may-16-2023
I hope it’s OK with you if I mention two posts I recently published, one on Vector Group and the other on the FDA’s proposed menthol ban:
https://open.substack.com/pub/debunkingthedebunkers/p/vector-group-traditional-discount
https://open.substack.com/pub/debunkingthedebunkers/p/revisiting-fdas-proposed-menthol