Thierry from arvy
CFA, Co-Founder & CIO of arvy, Quality Investing
Big Tobacco remains attractive because scale lowers unit costs and nicotine substitution can shift consumption beyond cigarettes. Cigarettes are homogeneous, so volume lowers costs; Sweden's shift to snus and nicotine pouches shows where consumption can move. The screen ranks tobacco among the strongest subsectors on fundamentals and market pricing. x.com x.com x.com x.comÂ
Philip Morris faces a more complicated shareholder outlook as nicotine-pouch competition intensifies despite healthy U.S. demand. ZYN shipment volume grew 4.2% year over year in Q3, while Philip Morris is increasing investment, expanding formats and adjusting prices to defend share. x.comÂ
British American Tobacco carries cannabis optionality that few big companies admit to, and Big Tobacco will lean into cannabis hard rather than pull back. BAT describes a "foothold in the cannabis space" that is "several years away from being a meaningful contributor". @UseThouBrain, in the post being answered, backs Organigram on the view that BAT's idea of meaningful means billions, backed by patent-pending non-combustible IP; that is a different bet, far down the field, but not a bad one. … Show more
Philip Morris's growth valuation is vulnerable because Velo is ramping while moving from 15 to 20 ZYN pouches per can effectively cuts the price per pouch by 25%. At 29-30x earnings, the timing suggests ZYN is getting beaten; if volumes fall and the multiple drops to 17x, PM could really tank. Combustibles are in terminal decline, and PM trades like Altria despite half its yield and twice its multiple. The bigger pack may be right long term, and ETF flows and baskets could foil a short. x.com … Show more
Philip Morris offers profits outside everybody's favorite ten hyperscale stocks. On a walk around New York's East Village, literally every young woman seemed to be smoking a cigarette, Midwestern transplants as well as alternative crowds. Per Threadguy, the stock is quietly at all-time highs near $194 as vaping became embarrassing and Zyn took over. x.comÂ
British American Tobacco is a cigarette turnaround story nobody is talking about, with the stock up 100% in 18 months while paying a 6-10% dividend. x.comÂ
Developments around Altria's on! nicotine pouch brand look unfavorable, with new flavors coming in Q4 for on! Plus. x.comÂ
Altria, British American Tobacco and Philip Morris are priced as if headed to a terminal zero, so if that end date disappears, their valuations gain embedded convexity. Buybacks add EPS convexity by shrinking the share count, making a share of tobacco a different investment than owning the whole company. Fast-growing nicotine pouches, highlighted in a Reuters report shared by @tobaccoinsider, are the focus for a future beyond cigarettes. x.comÂ
Safe-haven stocks such as Altria, Philip Morris, Starbucks, Cboe, CAVA and Costco deserve attention in this market; they are on fire this week. Walmart, Coca-Cola, Apollo, Procter & Gamble and Visa are also showing strong setups. x.comÂ
Philip Morris is too richly valued, at a 25.5x trailing P/E, a 6% premium to its sector, and a PEGY of 2.14x. Beaten-down staples such as Campbell's could be a safer contrarian place to be if the economy turns rocky or enters recession next year. x.comÂ
Turning Point Brands looks extremely interesting after falling about 60% from its highs, as it has become almost a pure play on nicotine pouches over the past two years. The new CEO may kitchen-sink results and the chart is unattractive, but betting on a materially lower price before upcoming catalysts play out looks increasingly poor. x.comÂ
