Give the tobaccos a little more rope. They are drifting down now after what looked like a catharsis two weeks ago which drove MO below 40 and RN below 30. The guys who bought that bloodbath are now getting nervous. Despite my view on the market, I would probably start nibbling at Philip Morris at 35-37. (I have little interest in the others although you could make an even more compelling value case for any of them - if I'm going to take the risk of tobacco, I want a great business, and thats Philip Morris.) 35-37 on Philip Morris (thats my gauge, the other stocks will move too, so if they are the one you want, just watch MO and that will give you your entry point. But if it drifts to that level on this kind of news, I would wait. What I want is another catharsis - another big scare that takes it to 35. Thats when I get in. And steel yourself now, because whatever takes Philip Morris to 35 will sound so awful that you won't want to touch it. What I have found very profitable with the tobaccos is to pick a price 10% below any reasonable target, but when it gets there buy it no matter what you are thinking. Then when you're getting comfortable owning tobacco you will be up 30%. Thats when you sell.
I made a lot of money trading in and out of Philip Morris two years ago - buy on extreme fear, sell on comfort - then sold for a huge profit when everybody started getting excited about a settlement. I did not trust the governement and I was right. I caught near the high over a year ago, and am still waiting for the "fear factor" to get high enough again to get back in. So far, the sidelines have been the place to be. |
