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Non-Tech : Philip Morris - A Stock For Wealth Or Poverty (MO) -- Ignore unavailable to you. Want to Upgrade?

To: md1derful who wrote (6093)	1/25/2001 5:54:04 PM
From: Jim Oravetz	Read Replies (1) \| Respond to of 6439

Research Analyst: Will Frankenhoff (1/23/01) individualinvestor.com "I am no friend of the tobacco industry," U.S. Attorney General-designate John Ashcroft said last week, sparking concern that the incoming Bush administration might not be as light-handed in its treatment of tobacco companies as was thought previously. Then, to top it off, Ashcroft added that he is "not pre-disposed to dismiss that suit," referring to the Justice Department's case against the tobacco companies. Ashcroft's statements sounded stern and some observers were probably disappointed to hear them given that the Justice Department's lawsuit is one of the last major litigation issues facing the tobacco industry (the other being the Engle case). Many investors were expecting the Bush administration to let the issue die a quiet death. Although we wouldn't go so far as to characterize Ashcroft's comments as bluster, we believe they should be put into perspective. Ashcroft made these statements during contentious confirmation hearings where he was grilled about his more conservative positions and controversial actions during his tenure as governor of Missouri. The last thing Ashcroft needed was to be viewed as biased in favor of the tobacco companies. A more appropriate indicator of the prospects of the industry under the new administration is the fact that President George W. Bush has consistently supported legislation that would automatically shift class-action lawsuits from state courts to federal courts. While this support might seem insignificant, it should be noted that each of the 13 federal courts that have reviewed at least one tobacco class-action lawsuit has dismissed the case. Furthermore, while President Bush is unlikely to take a hands-on approach to the selection of federal judges, he is likely to appoint conservative judges that are reluctant to divine new meanings to existing laws. And, since established law is generally supportive of the tobacco industry's positions, Bush's appointments to the bench are unlikely to prove hostile to its interests. Meanwhile, there have been numerous other recent developments that should reassure investors that the tobacco companies' legal prospects are improving. Among these are the industry's victories in 14 of the last 18 trials (a 78% win rate); the passage of legislation capping punitive-damages in Florida, Virginia, Georgia, Kentucky, and North Carolina; and the Supreme Court's decision that the Food and Drug Administration lacks regulatory authority over the marketing of tobacco products. Simply put, as the industry's prospects improve so does the outlook for Phillip Morris Cos. (NYSE: MO) . As we outlined in our previous update (December 14), our sum-of-the-parts valuation indicates the stock is worth at least $57. Given the improved legislative, judicial, and regulatory climate, this valuation could prove conservative as litigation risk fades as a threat to the financial well-being of Philip Morris and its competitors. Updated on January 23, 2001 with MO trading at $44.31. Recommended on December 9, 2000 at $39.63.