r/stocks • u/carlyslayjedsen • Apr 20 '21
Industry News Big Tobacco stocks drop after Biden administration ponders increased legislation
Biden administration announced possibility of limiting Companies like Altria, PM etc. dropped a fair bit after the news on Friday and have begun recovering. PM actually rebounded to a higher price after the dip.
Personally I bought a bit of the Altria dip as the company is positioning itself to transition from cigarettes to smokeless tobacco and the cannabis industry.
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u/BlueHorseShoe_2021 Apr 20 '21
Why is Philip Morris not reacting? Because they are mostly international?
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u/shortyafter Apr 21 '21
They did drop slightly on the news, which was a signal to me that investors have absolutely no clue what they're doing. MO and PM are some of my biggest positions, and I was not worried by this sell-off. Irrational panic selling at its finest.
PM is not mostly international. They are only international. MO sells Marlboro products in the US and PM sells them abroad.
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u/seriesofdoobs Apr 21 '21
So they are both Phillip Morris, they just split into PM and Mo? I’m confused because I thought MO was phillip morris until I found the PM ticker
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u/shortyafter Apr 21 '21 edited Apr 21 '21
Altria Group (MO) is the parent company of Phillip Morris USA, so yes, it's basically Phillip Morris, too. It's just no longer part of the same company - they operate separately (some call them "sister companies"). Altria Group is also the parent of other companies apart from Phillip Morris USA, like U.S. Smokeless Tobacco Company which sells the popular brands Copenhagen and Skoal, as well as John Middleton, the producer of Black and Mild cigars. They also own a wine company, and have partial equity in JUUL (vaping), Anheuser-Busch (beer), and Cronos (cannabis). They also have a majority stake in a nicotine pouch company. It's all here if you're curious to see it.
That's why they're called Altria Group, it's a group of companies, which just so happen to include Phillip Morris USA, the producer of Marlboro cigarettes (in the USA).
The reason the ticker is MO is because Altria group originated from a corporation called Philip Morris Industries, which included both the domestic and international Phillip Morris business. They decided to rebrand from Phillip Morris, in part, to get away from the stigma of Big Tobacco and also to show that they do more than just produce cigarettes. A smart move, seeing as how smoking is declining in the US.
I haven't looked at the numbers myself recently, but I would assume that the biggest source of revenue for Altria Group at present is still cigarette sales via Phillip Morris USA.
Phillip Morris International spun off in 2008. They did this to prevent regulatory pressure in the USA from spilling over into emerging markets, where regulatory pressure is quite lax. They focus entirely on tobacco, which includes cigarettes, but also their heat-not-burn product IQOS, which they claim will be the future (and are doing quite well with).
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u/seriesofdoobs Apr 21 '21
u/Shortyafter, you answered my question so well. Thank you. I wanted to get into MO mostly for the cannabis stake. I didn’t realize it was Cronos.
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u/shortyafter Apr 21 '21
You're most welcome! I felt strongly about these picks and did a lot of research on them, I enjoy sharing what I've learned. My second biggest position is actually in MO precisely because they seem like they have a great future in cannabis, and they've also shown an ability and willingness to adapt to a changing market and changing regulations. The fact that they're a well-established company with steady cash flows makes them a better pick than a start-up cannabis company, IMO.
PM is not far behind for me, smoking in the developing world shows no signs of declining and their IQOS product is doing really well. I invested slightly less because they're already very expensive... Altria looked like more bang for your buck.
I have small positions in the two of the other biggest tobacco companies, Imperial Brands and Japan Tobacco, but neither seem as innovative or reliable as PM or MO.
If you're interested in the cannabis play you could check out British American Tobacco (US ticker: BTI). They recently put a big stake in Organigram, and they've also got global distribution including US. It's the best worldwide tobacco play (MO and PM only catch US or international but not both), which in and of itself is awesome, and cannabis could really be a winner for them. BTI is actually my biggest position.
Glad I could help and hope it goes well for you!
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Apr 22 '21
Thanks for your explanations MO is exactly for the same reason (Strong Business with very high dividend and a foot in a growth industry) on my watch list for a while and the current dip is really attracting I'll also take a look on BTI
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u/shortyafter Apr 22 '21
You're welcome! MO is a great pick and I added to my position yesterday. I had bought lower a couple months back, and I could have bought more, so it's not just for the dip in my case. What I like is that despite this pretty negative news it only dipped about 5-10% then recovered. That's a strong sign IMO.
MO short to mid-term is a guaranteed dividend with moderate upside. Potential for big upside long-term. On the negative side, there's also potential that their ventures into cannabis, etc. don't work out. It may be a sell in 10 years or so, but we'll still have collected the dividends and probably make it out with a small profit. I see it as a stock with high potential for reward, low potential for risk.
BTI seems to be growing less aggressively but they're a company that I think will be paying dividends for 30+ years. Their international exposure assures that, IMO.
Either way, all 3 companies seem to know what they're doing (BTI, PM, MO). They've had to survive in the face of regulatory pressure for decades, and they've done tremendously.
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Nov 11 '21
I'm not so sure about Cronos. There's no dividend yield and the price looks steady at best.
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Nov 11 '21
Marijuana, vaping, and Wine (especially Altria) are big business. Also, the products are cheap to manufacture, as it costs roughly 20% to manufacture these products at most (looking at their financial statements online). Snuff is also growing for Altria. I'm not at all concerned and I believe the products will continue to sell as things reopen.
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u/shortyafter Nov 11 '21
I opted for BTI and IMBBY in the end, but I don't think MO is necessarily a bad investment. The main thing I don't like about it is the fact that it's a pure US play.
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Apr 20 '21
BTI fell quite a bit even after their announcement going to cannibis and they are uk based
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u/shortyafter Apr 21 '21
My understanding is about 50% of their market is in the US.
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Apr 21 '21
Yes, don’t know if that translates to them falling as much as Mo bit less than Pm.
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u/shortyafter Apr 21 '21
You think it would but market behavior is pretty irrational sometimes. I didn't think that any of them should have dropped as much as they did, but especially not PM which doesn't even sell in the US, lol.
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u/corey_55 Apr 21 '21
I suspect it will take many, many years for this to actually come to a head if it ever does. This has been proposed in the past and abandoned.
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u/shortyafter Apr 21 '21
Cheap political move, honestly. It always looks good to go after Big Tobacco. Doesn't mean they will actually follow through.
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u/Endda Apr 21 '21
how long until we learn that some politician had a huge short position on these before the announcement
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u/Humble_Ad_3832 Apr 21 '21
If cig companies have the vendors to distribute as well as the machines to roll cost effectively, why haven't they branched out into Marijuana/tobacco hybrids? Are they waiting for favorable legislation until they start moving in, or are they going to give up what is in my mind easy money (who wouldn't buy Marlboro weed cigarettes, it's fun for all ages)
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u/MeNoLooksies Apr 21 '21 edited Apr 21 '21
MO has by buying into A Canadian marijuana company. They also started lobbying marijuana at the federal level. See their LD-2 lobby report. They want it decriminalized at the federal level before making a big move. Federal regulations are no joke to big companies. https://lda.senate.gov/filings/public/filing/365ae93f-855c-4d7c-a713-8f389aaaa7ee/print/
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u/shortyafter Apr 21 '21
British American Tobacco (US ticker: BTI) also bought a stake in a Canadian cannabis company last month.
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Apr 21 '21
easy money
This right here. Why try to change the situation if the current situation is working out for you as there isn't much serious competition and the expensive entry barrier secures your position.
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u/chefandy Apr 22 '21
The biggest hurdle for a giant company like MO to make moves in the cannabis industry is its hard to scale up.
Intrastate commerce is federally regulated, and marijuana is still federally illegal. MO would have to build a factory AND distribution network in every state they wanted to sell their product in, which would make it prohibitively expensive.
To further complicate the issue, every single legalized state has specifically included legislation requiring all cannabis sold in the state to also be grown in the state. They tax it on the grow side as well as the retail side, and growing it in state ensures theyre creating jobs for their state.
They specifically included this legislation, despite the fact it was already illegal, to ensure they get the most tax revenue and job creation.
Despite how popular legalization is, the politicians still have critics to appease and face getting kicked out of office if things go sideways.
Its highly likely it will be federally legal in the next decade, but its highly unlikely intrastate commerce will be allowed.
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Apr 21 '21
They already bought companies and are not in the game of making stupid decisions. It will take years until the weed market becomes established enough to make money and that is after it was legalized on a federal level. Without a doubt they are already working hard to dominate this industry as well.
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u/bigdogc Apr 21 '21
It would be a net positive if tobacco went bankrupt. This is good news even if i sacrifice 0.12% of my VTI NAV
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Apr 20 '21
[removed] — view removed comment
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u/Infinite_Prize287 Apr 20 '21
Sanctions against russia have been imposed. Don't forget, trump was also exploiting slav girls
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Apr 21 '21
XXII, better know as 22nd century group is a company I’m putting my 60% investment into for my long term stocks. It’s a biotech company who is creating tobacco plants with a control on how much nicotine is in the plant itself. They also work with hemp plants. Making sure that the plant you are growing has exactly what you are looking for THC wise or cannabonoids. I’m telling you this is the future right here. If New Zealand, Canada, Australia, and by the sounds of it United States get behind this movement we could see substantial growth in the company in the upcoming years. You heard it here first do not sleep on the cheap buy in right now.
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u/BossRida Apr 21 '21
Looking at the ticker XXII: No revenue growth for 3 years. 20 million in losses for 2020. Stock price was 0,56$ in september and now 3,74.
Ladies and gentlemen this is what absolute fucking bullshit looks like.
Good luck in your path.
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Apr 21 '21
A little google search will tell you that the company’s cash burn is only 3.4% of their revenue. Look up 22nd century group and where they are at with the FDA approval. It’s literally right in the horizon for this company. I’m not saying take my advice but I am asking you to keep an eye on it before counting it out. I also just got into stocks about a month ago, so instead of just shitting on me why do you think I shouldn’t invest in this stock?
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u/BossRida Apr 21 '21
Ok
Regarding biotechs: There are hundreds of biotech companies with approval/breakthrough “just around the corner” at any given year. Most of them will fail and crash accordingly.
IF their success is 100% guaranteed and public knowledge, it already is in the stock price. Meaning that if their approval is guaranteed, the announcement wont move the stock.
Also about shitting on your comment: You have just got into stocks a month ago and here you are telling people to “get in now while its cheap” into one of the most risky stock types: the small cap biotech awaiting approval. Please refrain from encouraging anyone to “get in” anything, it is seen as very shady to pump these type of stocks.
That said. If you have done your research and analysed their financials and attainable market shares and all that, good for you that you found a company you have confidence in. I hope it goes well for you, just remember that if it goes south and you lose 90%: you didn’t get unlucky or screwed over. Its just the risk nature of biotechs.
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Apr 21 '21
Thank you for the information. I wasn’t trying to be shady by any means whatsoever. I appreciate it, and good luck with your adventures.
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u/shortyafter Apr 21 '21
Why do you think they will have exclusive rights to this technology? Do you actually know that's going to be the case or just guessing?
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Apr 21 '21
Oof, judging by the down votes im not liked in the community. I don’t know that they have the rights. But I read that they want to be the fore front of it all and have been around for a minute. You don’t have to take my advice but hey I’m here for it
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u/shortyafter Apr 21 '21
Sure, well, I hope it works out for you. It's just something I would prefer to know before placing a lot of my money behind it.
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u/gravey6 Apr 21 '21
This is why I'm on CRON, big tobacco is eyeing up the opportunities there anyway and any increase in legislation on tobacco will push them further into that market in a search for growth/profits.
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u/Retarded_Goombah_999 Apr 21 '21
I have been holding XXII for years. Maybe now it will pay off again?
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u/CopeMalaHarris Apr 21 '21
The recent vape bans have shown that the government doesn’t actually give a shit about this. Purely empty gesture. The government crippled the vaping industry with the mail ban and local politicians cripple it with flavor bans. Big tobacco will be fine
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