MO, RJR: Couple years ago when there was discussion here and in the media about tobacco and associated lawsuits and class action settlements, MO was trading about 21, and I bought a very small amount. There were professional value investors pounding the table, saying buy, buy. Others (also value mutual fund mangers) were saying avoid because nobody can scope or figure what the extent of liabilities is, how juries will vote or the $$ they might award, how public distaste for tobacco companies will influence lawmakers, etc. The negative case became too strong for me. The tobacco stocks couldn't be value stocks because of so many unknowns. I lost confidence and sold at a loss and near the lows (as you can see):
finance.yahoo.com
I don't know if the situation with tobacco and liability has changed. Perhaps we're in a 2nd round when the stocks will be brought to the floor by lawsuits/pricing/taxes whatever.
However, with RJR now paying close to a 10% dividend, it is just too tempting. So I am buying tobacco again today, and I will try again to hold on.
RJR's going for a p/e of 6, sells for $39+, has $28/sh in cash, book value of $82, with d/e =.33 (Yahoo numbers)
(aside: For strong anti-tobacco people: We've already covered the moral aspects of tobacco on this thread. And I've revisited my concerns again too. Let's not rehash here.) |
