I think MPP has the best outlook of all the cigar stocks. They have very strong brands and make quality cigars. Obviously the current glut of cheap cigars has not helped things for higher-priced manufacturers like MPP. But in the end, the brands and quality will prevail.
The other interesting question, besides the settlement, is what will happen with Cuba? There are lots of possibilities and MPP might be well advised to use some of their cash to make an investment in Cuba, if and when the embargo is lifted. There are lots of other issues there, e.g., the trademark issues with the old Cuban brands. But it should be interesting to see what happens.
On the settlement front, the tobacco companies screwed themselves....big time. It may actually be easier to derail a bill than pass a settlement. We'll see. But let's hope Congress isn't so pissed off that they pass an omnibus(Congress' favorite word) tobacco bill designed to prevent youth smoking. This could end up much, much worse than any settlement bill. The reason why is that once you remove the framework of a settlment from any bill, there are no more rules and no constraints. While there were bills that included cigars, the McCain bill did not (at least not directly), and stuck to the original premise: a bill to codify the settlement reached by the states and the companies. Yes, the McCain bill was much more punitive than the settlement, but it still followed the framework. A new bill or amended bill could address all forms of tobacco.
We'll see, but I'm sure the cigar stocks will benefit if any bill is killed.
-Scot |
