How can Altria stock go up 71000% since 81% when U.S cigarette consumption dropped 44%? This question is more suitable for value investors. This may not be the right question to ask on an elitetraders forum but I assume many of you traders here have more than one trick up your sleeve. I believe some of your practise value investing occasionally. I was dumbfounded when I read this tweet. Cannot think of logical explanation since it sounds contradictory. U.S. cigarette consumption has dropped 44% since 1981. Altria stock is up 71,000% since 1981. Investing is hard. EDIT: posted on wrong topic. I should have posted it on Stocks topic.
Without looking, I would assume they've bought up a lot of competitors. They have probably branched out into the vaping biz too to help offset some of the smoking decline.
Thats a great question. Its pure financial engineering by the best and brightest Ivy League B School Alum that money can buy. For one thing, its an extremely high cash flow business with minimal incremental costs. They buy back Billions of dollars of shares every year. This year alone they have authorized $2 Billion in share buybacks. http://investor.altria.com/phoenix.zhtml?c=80855&p=irol-newsArticle&ID=2349710 3 Billion the year before that. Add to that a 10%-ish ownership stake in InBev and all their other deals over the years... Its one of the best run companies in the world. American corporate capitalism on steroids. Especially considering all the headwinds over the years. The best of the best. ----------------------------------------- The brand portfolios of Altria’s tobacco operating companies include Marlboro®, Black & Mild®, Copenhagen®, Skoal®, MarkTen® and Green Smoke®. Ste. Michelle produces and markets premium wines sold under various labels, including Chateau Ste. Michelle®, Columbia Crest®, 14 Hands® and Stag’s Leap Wine Cellars™, and it imports and markets Antinori®, Champagne Nicolas Feuillatte™, Torres® and Villa Maria Estate™ products in the United States.
The simple reason is because their ticker symbol is MO, as in Mo' Money. Also states have minimum prices for tobacco, so nobody can sell it cheaper even if they wanted to. And 44% in almost as many years is only 1%/year that isn't that much. The price of cigarette probably increased way faster... "The nationwide average price for a pack of cigarettes was 81.9 cents at the end of last month, up from 63 cents for all of 1981 and 60 cents for 1980, the Tobacco Institute, an industry body, reported yesterday." ---- Nov. 1982 Today it is $6-8... with a cost of 5.51 http://www.in2013dollars.com/Cigarettes/price-inflation/2000-to-2018?amount=5 "Between 2000 and 2018:Cigarettes experienced an average inflation rate of 5.69% per year. This rate of change indicates significant inflation. In other words, cigarettes costing $5 in the year 2000 would cost $13.55 in 2018 for an equivalent purchase. Compared to the overall inflation rate of 2.12% during this same period, inflation for cigarettes was significantly higher."
Anybody wants to buy JUUL? From SA comments: "--No mention of Altria's proposed minority stake in Juul. --No yet. But it’s coming. It’s pretty much the only reason they would be dropping their vape products. I don’t think Iqos is a direct competitor to vaping. It’s a different product that will appeal to a different population segment. Either way though, MO wins." https://seekingalpha.com/news/3415260-altria-group-backs-away-vaping-products
As more and more states in the US legalize recreational marijuana the more the industry will grow. It will eventually be legal on the federal level in the US (and as we know Canada just did this), and when that happens, watch out tobacco bears!
Very True! Before I left Northern California in May word amongst the growers and manufacturers was that Altria had bought up to 30,000 acres of land in Mendocino and Humboldt Counties. If true, It ain't for growing Tobacco.