Modest Money | Jul 30, 2017 02:40AM ET
You can’t say that Philip Morris International Inc (NYSE:PM) isn’t persistent. If you’re more than a couple of decades old, you’ll recall numerous attacks to the tobacco giant and their competitors. “Attacks” doesn’t imply these events were unwarranted.
Big tobacco companies like PM had the gall to claim that it was impossible to know if cigarette smoke was linked to cancer. Since then, the company has faced a cultural backlash against smoking. This, combined with the fact that it must be hard to stay in business when you kill your own customers, makes PM ’s endurance and growth seem all the more remarkable.
Which brings us to the latest major development in the battle against Big Tobacco. The FDA has announced that it will consider limiting nicotine content in cigarettes to levels that will not cause addiction. Implicit in this statement is that a cigarette that doesn’t cause addiction can scarcely cause the stimulant high that smokers need to get through the day. If all goes as the FDA wishes, cigarettes could become little more than cancer sticks, with no medical/psychoactive/stimulant properties at all. By taking the drug out of the drug, how could a tobacco company possible stay in business?
Philip Morris competitors took a dive following the announcement (Altria Group (NYSE:MO) stock -9.4%, British American Tobacco (LON:BATS) -7.8%, Vector Group Ltd (NYSE:VGR) -4.4%). PM fell too, but only for a few minutes. Since then it has recovered to cruising altitude as if nothing ever happened. The question is: can it stay that way, or even grow?
This depends upon a number of factors. Here’s how I see it:
PM is a giant, with an impressive financial history, and excellent dividends. I would not recommend it for the long term holder, however. The price is likely to jump around in the coming weeks and months, so if you are the kind of person who likes to buy the dip, PM is likely to recover from volatility more reliably than their immediate competitors. Buy and sell accordingly.
That’s it from me. What do you think about PM or the tobacco industry in general?
Original Post
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.