Best of the Week
Most Popular
1. TESLA! Cathy Wood ARK Funds Bubble BURSTS! - 12th May 21
2.Stock Market Entering Early Summer Correction Trend Forecast - 10th May 21
3.GOLD GDX, HUI Stocks - Will Paradise Turn into a Dystopia? - 11th May 21
4.Crypto Bubble Bursts! Nicehash Suspends Coinbase Withdrawals, Bitcoin, Ethereum Bear Market Begins - 16th May 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.Cathy Wood Ark Invest Funds Bubble BURSTS! ARKK, ARKG, Tesla Entering Severe Bear Market - 13th May 21
7.Stock Market - Should You Be In Cash Right Now? - 17th May 21
8.Gold to Benefit from Mounting US Debt Pile - 14th May 21
9.Coronavius Covid-19 in Italy in August 2019! - 13th May 21
10.How to Invest in HIGH RISK Tech Stocks for 2021 and Beyond - Part 2 of 2 - 18th May 21
Last 7 days
US Economy and Stock Market Addicted to Deficit Spending - 17th Oct 21
The Gold Price And Inflation - 17th Oct 21
Went Long the Crude Oil? Beware of the Headwinds Ahead… - 17th Oct 21
Watch These Next-gen Cloud Computing Stocks - 17th Oct 21
Overclockers UK Custom Built PC 1 YEAR Use Review Verdict - Does it Still Work? - 16th Oct 21
Altonville Mine Tours Maze at Alton Towers Scarefest 2021 - 16th Oct 21
How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
The Only way to Crush Inflation (not stocks) - 14th Oct 21
Why "Losses Are the Norm" in the Stock Market - 14th Oct 21
Sub Species Castle Maze at Alton Towers Scarefest 2021 - 14th Oct 21
Which Wallet is Best for Storing NFTs? - 14th Oct 21
Ailing UK Pound Has Global Effects - 14th Oct 21
How to Get 6 Years Life Out of Your Overclocked PC System, Optimum GPU, CPU and MB Performance - 13th Oct 21
The Demand Shock of 2022 - 12th Oct 21
4 Reasons Why NFTs Could Be The Future - 12th Oct 21
Crimex Silver: Murder Most Foul - 12th Oct 21
Bitcoin Rockets In Preparation For Liftoff To $100,000 - 12th Oct 21
INTEL Tech Stock to the MOON! INTC 2000 vs 2021 Market Bubble WARNING - 11th Oct 21
AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
Stock Market Wall of Worry Meets NFPs - 11th Oct 21
Stock Market Intermediate Correction Continues - 11th Oct 21
China / US Stock Markets Divergence - 10th Oct 21
Can US Save Taiwan From China? Taiwan Strait Naval Battle - PLA vs 7th Fleet War Game Simulation - 10th Oct 21
Gold Price Outlook: The Inflation Chasm Between Europe and the US - 10th Oct 21
US Real Estate ETFs React To Rising Housing Market Mortgage Interest Rates - 10th Oct 21
US China War over Taiwan Simulation 2021, Invasion Forecast - Who Will Win? - 9th Oct 21
When Will the Fed Taper? - 9th Oct 21
Dancing with Ghouls and Ghosts at Alton Towers Scarefest 2021 - 9th Oct 21
Stock Market FOMO Going into Crash Season - 8th Oct 21
Scan Computers - Custom Build PC 6 Months Later, Reliability, Issues, Quality of Tech Support Review - 8th Oct 21
Gold and Silver: Your Financial Main Battle Tanks - 8th Oct 21
How to handle the “Twin Crises” Evergrande and Debt Ceiling Threatening Stocks - 8th Oct 21
Why a Peak in US Home Prices May Be Approaching - 8th Oct 21
Alton Towers Scarefest is BACK! Post Pandemic Frights Begin, What it's Like to Enter Scarefest 2021 - 8th Oct 21
AJ Bell vs II Interactive Investor - Which Platform is Best for Buying US FAANG Stocks UK Investing - 7th Oct 21
Gold: Evergrande Investors' Savior - 7th Oct 21
Here's What Really Sets Interest Rates (Not Central Banks) - 7th Oct 21
CISCO 2020 Dot com Bubble Stock vs 2021 Bubble Tech Stocks Warning Analysis - 6th Oct 21
Precious Metals Complex Searching for a Bottom - 6th Oct 21
FB, AMZN, NFLX, GOOG, AAPL and FANG+ '5 Waves' Speaks Volumes - 6th Oct 21
Budgies Flying Ability 10 Weeks After wings Clipped, Flight Feathers Cut Grow Back - 6th Oct 21
Why Silver Price Could Crash by 20%! - 5th Oct 21
Will China's Crackdown Send Bitcoin's Price Tumbling? - 5th Oct 21
Natural Gas News: Europe Lacks Supply, So It Turns to Asia - 5th Oct 21
Stock Market Correction: One More Spark to Light the Fire? - 5th Oct 21
Fractal Design Meshify S2, Best PC Case Review, Build Quality, Airflow etc. - 5th Oct 21
Chasing Value with Five More Biotech Stocks for the Long-run - 4th Oct 21
Gold’s Century - While stocks dominated headlines, gold quietly performed - 4th Oct 21
NASDAQ Stock Market Head-n-Shoulders Warns Of Market Weakness – Critical Topping Pattern - 4th Oct 21
US Dollar on plan, attended by the Gold/Silver ratio - 4th Oct 21
Aptorum Group - APM - High RIsk Biotech Stocks Buy, Sell, Hold Investing Analysis for the Long-run - 3rd Oct 21
US Close to Hitting the Debt Ceiling: Gold Doesn’t Care - 3rd Oct 21
Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
Original Oculus VR HeadSet Rift Dev Kit v1 Before Facebook Bought Oculus - 3rd Oct 21
Microsoft Stock Valuation 2021 vs 2000 Bubble - Buy Sell or Hold Invest Analysis - 1st Oct 21
How to profit off the Acquisition spree in Fintech Stocks - 1st Oct 21
�� Halloween 2021 TESCO Shopping Before the Next Big Panic Buying! �� - 1st Oct 2
The Guide to Building a Design Portfolio Online - 1st Oct 21
BioDelivery Sciences International - BDSI - High RIsk Biotech Stocks Buy, Sell, Hold Investing Analysis for the Long-run - 30th Sep 21
America’s Revolving-Door Politics Behind the Fall of US-Sino Ties - 30th Sep 21
Dovish to Hawkish Fed: Sounds Bearish for Gold - 30th Sep 21
Stock Market Gauntlet to the Fed - 30th Sep 21
Should you include ESG investments in your portfolio? - 30th Sep 21
Takeda - TAK - High RIsk Biotech Stocks Buy, Sell, Hold Investing Analysis for the Long-run - 29th Sep 21
Stock Market Wishing Away Inflation - 29th Sep 21
Why Workers Are NOT Returning to Work as Lockdown's End - Wage Slaves Rebellion - 29th Sep 21
UK Fuel PANIC! Fighting at the Petrol Pumps! As Lemmings Create a New Crisis - 29th Sep 21
Gold Could See Tapering as Soon as November! - 29th Sep 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

This Tobacco Stock Is a Big Winner from E-Cigarette Bans

Companies / Investing 2019 Jul 11, 2019 - 03:53 PM GMT

By: Robert_Ross

Companies

In late June, San Francisco banned e-cigarette sales completely. That means no brick and mortar sales. And no e-cigarette deliveries for online purchases.

Many cities already restrict vaping and e-cigarette sales. But San Francisco is the first major US city to ban sales outright.

Granted, it’s a cultural and political outlier. But other cities are already considering similar laws. So this looks like the start of a bigger trend that could weigh heavily on certain tobacco companies.

Despite this thread, tobacco companies are still a great, recession-proof investment. And there’s one tobacco stock that will benefit from the crackdown on e-cigs big time.


The 800-Pound Gorilla of E-Cigs

E-cigarettes hit the US a little over a decade ago. Now it’s a $25-billion market.

The e-cig explosion has been a big boon for certain tobacco companies.

That’s especially true for Altria Group (MO), which also makes Marlboro cigarettes. In 2018, Altria bought a 35% stake in Juul Labs, the world’s largest e-cigarette company.

Juul is the 800-pound gorilla of the e-cigarette world. It has a 70% market share. (Ironically, it’s based in downtown San Francisco.)

Juul expects sales to grow by 160% to $3.4 billion in 2019. But if other cities follow San Francisco’s lead, this figure—and Altria’s 35% cut—could shrink dramatically.

It would hurt other e-cig-dependent tobacco companies as well, like UK-based Imperial Brands (IMBBF). Imperial generates around 3% of sales from its e-cigarette line. That sounds small. But e-cigs made up 40% of the company’s sales growth over the last two years.

Then there’s British American Tobacco (BAT). The company created its own vapor brands, including Vuse and Vype. While British American’s core tobacco sales were flat in 2018, the vapor segment grew 19% over the last year.

More e-cig bans would certainly slow this rapid growth. But income investors should still take a close look at tobacco stocks…

A Catalyst for Traditional Cigarettes

Governments will likely continue to restrict vaping and e-cigarette sales. This shouldn’t be all that surprising.

E-cigarette use among minors has doubled since 2017, according to a recent survey from the National Institute on Drug Abuse. It was the largest year-over-year jump for any substance ever measured by the 44-year-old survey.

That sort of thing makes parents panic. And panicked parents can push local governments to “do something,” even if the overall public health benefit is questionable.

As Dr. Steven A. Schroeder, a professor of health at the University of California, San Francisco, put it, “It’s really smart politics but dubious public health.”

Nevertheless, more e-cig restrictions could stifle a major growth driver for tobacco companies. But that’s not the end of the world for Big Tobacco.

Most tobacco companies still make most of their money from traditional cigarettes. In fact, traditional cigarettes accounted for 95% of all tobacco sales in 2018.

And there’s a good reason for that: Cigarettes are highly addictive. That’s one of the reasons tobacco stocks are such a great any-weather investment.

You only have to look back to the global financial crisis to see this.

US stocks fell 27% between August 2007 and August 2010. But tobacco stocks held up remarkably well.

Altria and British American, which are a good proxy for tobacco stocks, grew 7.9% over the same period, as you can see in the chart below.



This wasn’t a fluke, either.

They also grew during the 2001 recession, rising 5.5% while the overall stock market dropped 15.5%.

In other words, while vaping bans don’t bode well for certain tobacco companies, that doesn’t necessarily matter for us. Many tobacco stocks are still great, recession-resistant investments.

E-Cig Bans Can’t Touch This Company

This might sound counterintuitive, but vaping bans could actually boost a company like Universal Corporation (UVV).

That’s because this century-old Virginia-based company does one thing: sell raw tobacco leaf to major players like China National Tobacco, Altria Group, and British American Tobacco.

It doesn’t have so much as a toe in the e-cigarette market. So e-cigarette regulations can’t hurt the company. (Perversely enough, they might even help, as smokers return to traditional cigarettes if and when e-cigarettes become harder to buy.)

Investors took notice of Universal’s unique position last week. Shares jumped 4.1% after the San Francisco ban was announced.

This is part of the reason Universal Group is the best tobacco company to buy right now. And for dividend investors like us, it offers a safe 5% dividend yield.

Don’t Get Smacked on the Way Down

Here at The Weekly Profit, we’re focused on finding safe and stable dividend-paying stocks. These are companies you want to own no matter what’s happening in the economy or the market.

Frankly, most investors take on too much risk. This leaves them vulnerable when the market heads south.

That’s especially true right now. As you likely know, the stock market is near all-time highs. And the US economy is nearing the end of a decade-long expansion.

Meanwhile, several closely watched indicators are pointing to a recession in the coming months.

That’s why you should start preparing your portfolio now. After all, nothing goes up forever. And you don’t want to get smacked on the way down.

The right tobacco stocks can help. Remember, people who buy cigarettes buy them no matter what. That makes tobacco stocks very resilient.

Yes, I know tobacco companies make addictive, unhealthy products. So does Coca-Cola (KO). And Pfizer (PFE). And a slew of other companies.

My job is to help you find the best dividend-paying stocks—not to play morality cop. We’re all grown-ups here. You can decide for yourself if investing in tobacco is something you’re comfortable with.

But bear in mind, the industry’s profits are almost guaranteed. So it’s at least worth a look.

The Sin Stock Anomaly: Collect Big, Safe Profits with These 3 Hated Stocks

My brand-new special report tells you everything about profiting from “sin stocks” (gambling, tobacco, and alcohol). These stocks are much safer and do twice as well as other stocks simply because most investors try to avoid them. Claim your free copy.

By Robert Ross

© 2019 Copyright Robert Ross. - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in