Tobacco Stocks: Key Takeaways
- Tobacco stocks may get a (deserved) bad rap, but see the big reasons to keep them on your watchlist.
- M&A between big tobacco companies and another HOT sector has shaken up both industries, which can lead to HUGE moves in stocks.
- If you do your homework, you’ll see a lot happening with tobacco stocks.
Here’s how you can take your trading discipline and strategies to the next level now.
While I agree with doctors that you shouldn’t use their products, tobacco stocks do have a place on your trading radar … Big tobacco companies have been eyeing cannabis stocks and hemp stocks for years, seeing the dollar signs in the weed leaves. They’ve also gobbled up much of the e-cigarette and vaping industry. But that strategy has had some problems of its own (more on that later…)
Here are seven tobacco stocks on my watchlist. (Details below…)
- Altria Group (NYSE: MO … read our analysis here)
- British American Tobacco (NASDAQ: BTI … read our analysis here)
- Philip Morris International Inc. (NYSE: PM … read our analysis here)
- RLX Technology Inc. (NYSE: RLX … read our analysis here)
- Turning Point Brands, Inc. (NYSE: TPB … read our analysis here)
- Universal Corporation (NYSE: UVV … read our analysis here)
- Vector Group Ltd. (NYSE: VGR … read our analysis here)
Top 7 Tobacco Stocks
Key reminder that this is only a list of stocks to watch. Always do your due diligence before every trade and never risk more than you can afford to lose.
Let’s look at the stocks…
Top Tobacco Stocks #1: Altria Group (NYSE: MO)
Virginia-based Altria Group (NYSE: MO) is one of the biggest players in the tobacco sector. The company was founded in London in 1985, but today it operates a large portfolio of companies on a worldwide basis.
The crown jewel of Altria’s holdings is Philip Morris USA, which produces cigarette brands like Marlboro, Virginia Slims, Benson & Hedges, Merit, Parliament, Alpine, Basic, and more. But more on that later…
In 2019, Altria dipped its toe into the cannabis industry by acquiring Canadian company Cronos Group Inc. (NASDAQ: CRON) for approximately $1.8 billion.
Interesting move … Now, any big move in the cannabis sector could directly affect Altria stock.
But Altria is a massive multinational corporation with many assets separate from Phillip Morris and Cronos. Altria’s market cap is a staggering $87 billion, putting it in a league above many others on this list. However, there’s one tobacco company even bigger than Altria…
Top Tobacco Stocks #2: British American Tobacco (NASDAQ: BTI)
British cigarette giant British American Tobacco (NASDAQ: BTI) is the largest tobacco company in the world by net sales, bringing in more than $33 billion in 2020. This company is almost 120 years old, founded in London in 1902.
Today, BAT operates in 180 countries, well-known for producing cigarette brands like Dunhill, Lucky Strike, Kent, Pall Mall, and Rothmans. In recent years BAT has also entered the vaping market through its Vibe, Vuse, and Glo e-cigarette brands.
In March of this year, BAT acquired a 20% stake in Canadian cannabis company OrganiGram Holdings (NASDAQ: OGI).
This is another big reason to watch this company moving forward. The tobacco and cannabis sectors are sure to intermingle more in the future.
Top Tobacco Stocks #3: Philip Morris International Inc. (NYSE: PM)
Philip Morris International Inc. (NYSE: PM) is the international version of Philip Morris USA. It was a subsidiary of Altria until a spinoff in 2008. The deal took place so that Philip Morris International could “pursue sales growth in emerging markets,” while Altria could keep its focus domestic.
In 2018, PM made a big move by acquiring a minority stake in vaping king JUUL Labs, Inc. for $12.8 billion, looking to wet its beak on the exploding e-cigarette industry.
But since then, Juul has been plagued with problems and Altria’s investment has been decimated…
In June 2021, Juul agreed to pay a $40 million settlement related to the death of a teenager in North Carolina. The judge agreed with State Attorney General Josh Stein that the company destroyed documents, provided thousands of pages of irrelevant information, and ignored court orders.
Things got worse when the entire Altria-Juul acquisition was put on trial. In June, U.S. District Judge William Orrick III advanced conspiracy and fraud claims against the company’s founders, board members, and Altria.
But like its relative Altria, Philip Morris is an enormous company that likely won’t be brought down by one bad investment or lawsuit.
Top Tobacco Stocks #4: RLX Technology Inc. (NYSE: RLX)
If you’re looking for an e-cigarette penny stock based out of China, I’m pretty sure your only choice is RLX Technology Inc. (NYSE: RLX).
According to its website, the company’s mission statement is to “make RELX a trusted brand for adult smokers through state-of-the-art products, industry-leading technologies, and scientific advances in collaboration with talented and committed people around the globe.”
But what does this mean specifically? RLX’s IPO disclosure claimed that it controlled “48% of the market share of closed-system e-vapor products in terms of retail sales volume” and “a mindshare of 67% among users of e-vapor products” in China.
That being said, this is a Chinese penny stock, so take any disclosures with a large grain of salt.
It would be reckless of me to not warn you about this. Stocks like RLX can make huge moves but are also incredibly dangerous. Trade this tobacco stock accordingly.
Top Tobacco Stocks #5: Turning Point Brands, Inc. (NYSE: TPB)
Turning Point Brands, Inc. (NYSE: TPB) is a tobacco and smoking-related products conglomerate based out of Louisville, KY. They own three companies — rolling paper king Zig-Zag, chewing tobacco company Stoker’s, and vaping product manufacturer NewGen.
Zig-Zag is the premium rolling paper brand in both the U.S. and Canada, controlling 35% of the total rolling paper market. The company also manufactures cigar wraps, hemp paper, and paper cones. Anyone who’s ever been to a jam band concert knows what a Zig-Zag is.
Stoker’s is a leading producer of moist snuff and loose leaf chewing tobacco (also known as moist smokeless tobacco or MST). Turning Point Brand’s Q2 2021 earning report shows that MST sales accounted for 62% of Stoker’s Q2 2021 revenue, showing how critical they are to Stoker’s and Turning Point Brands’ business.
NewGen is Turning Point Brands’ exploration into the vaping industry, and this quarter it wasn’t much of a success. During Q2, NewGen sales decreased more than 10%.
In general, this tobacco stock seems to offer a little bit of everything when it comes to tobacco, rolling papers, and vaping products.
Top Tobacco Stocks #6: Universal Corporation (NYSE: UVV)
Exotic tobacco dealer Universal Corporation (NYSE: UVV) doesn’t manufacture cigarettes like most of the companies on this list. Instead, it buys, sells, and processes flue-cured and burley tobacco.
In its portfolio of holdings, Universal owns fruit and vegetable ingredient processor FruitSmart, as well as a 49% stake in oriental tobacco leaf producer Socotab, LLC.
Universal just reported Q1 2021 earnings on August 4. Net income came in at $6.4 million, or 26 cents per diluted share, compared with $7.3 million, or 29 cents per diluted share in 2020. Net income and diluted earnings per share increased by $6.8 million and 28 cents respectively, compared to the same figures from 2020.
This is a more niche play than some of the other tobacco stocks on this list.
But it may be perfect for traders looking to have some tobacco sector exposure without owning a cigarette manufacturer. That being said, the chart is pretty boring, with shares trading at almost the same price as they were in January.
Top Tobacco Stocks #7: Vector Group Ltd. (NYSE: VGR)
Discount cigarette manufacturer Vector Group Ltd. (NYSE: VGR) owns Liggett Group, LLC which produces cigarette brands like Pyramid, Eagle 20’s, Grand Prix, Liggett Selects, Eve, and Montego. Founded in 1873, Liggett Group is the operating successor to Liggett & Myers Tobacco Company and is the fourth-largest cigarette manufacturer in the U.S.
But there’s more to Vector Group than just cigarette sales. Vector Group also owns 100% of Douglas Elliman Realty, LLC — the largest real estate brokerage in the New York Metropolitan area.
This gives Vector Group dual exposure to two radically different industries, which puts the stock in a unique category.
Real estate and tobacco mash-ups aren’t something you see every day, and this combination makes Vector Group stand out on any list of tobacco stocks.
The Bottom Line: Are Tobacco Stocks Smart Trades?
Now that you’re up to speed on the world’s leading tobacco companies — are tobacco stocks good for trading?
This depends on which tobacco stocks you pick to trade. Stocks that live in the same sector can sometimes trade similarly, but in the long run, there will be winners and losers. And among the winners, some will do better than the rest.
This is how it works in every industry — and why you should always do your homework. Learn the unique characteristics of each of these companies. Study the charts for previous runs. Understand what led to those spikes.
Studying this way can help you know your history, which is critical to success in trading.
For instance, knowing which companies have large exposure to the vaping industry could help you steer clear of those names if the e-cigarette industry has another negative headline.
Similarly, being aware of the conglomerates with cannabis companies in their portfolios could allow you to see trading connections that would not have been possible otherwise.
The way these industries have merged and combined over the past several years can lead to some juicy trading setups…
But if you’re going to trade tobacco stocks, you need to keep a close eye on the news, your finger in the history books, and your mind zeroed in on trading with DISCIPLINE.
What do you think about tobacco stocks? Let me know in the comments — I LOVE hearing from my readers.
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