Recession or not, there's one stock on the market right now that is a disgustingly good play. Altria (MO), aka Phillip Morris. Altria sells cigarettes under several brands, the most notable being Marlboro. Obviously this is a recession proof market, if anything people smoke more when they're stressed, this makes it a very safe play even if things with the economy get worse. Altria currently trades at 16x trailing twelve months earnings but we have a major catalyst here. Altria is splitting into 2 companies: one with US exposure and Phillip Morris International (PMI). PMI will be exposed to the hot growing places like China, apparently people in China love to smoke if they can afford it, and many of them are just getting enough money to afford it. Each shareholder will receive one share of each company when the split is consummated in March. The PMI shares will earn a higher multiple given their faster growth. On top of that PMI will begin with a 13BN share repurchase plan in place and a 65% dividend payout ratio in place. In english, PMI will have authorization to repurchase well over 10% of its shares outstanding. Share repurchase means there are fewer shares which boosts earnings per share and thus stock price. The 65% payout ratio means that 65% of earnings will be paid out in dividends. This ratio is only slightly less than Altria's current payout ratio, which gives the company a 4% yield right now, well above treasuries.
All that said, the Domestic Phillip Morris isn't exactly a bad thing to own right now either. You have the recession resistant product mix, and a shift to smokeless tobacco. The new domestic company will start with a 7.5BN repurchase program and a 75% dividend payout ratio. Meaning at current prices, the company would probably yield closer to 4.5%. The secret play in here that some people don't factor in is that Altria owns over a quarter of SAB Miller, yes the beer brewer. If you are inspired by Coors' numbers, Altria is a way to sneak in the back door on the beer play while getting the catalyst that the split should provide.
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Light - you forgot to add that Altria will be dropped from the DJIA later this month because of its apparent obsolescence to the US economy...anywho, I doubt our simulator will be adjusting for the spin-off, so any benefits you see from that should be nil.
ReplyDeleteMaybe once you stopped getting pwned by your call options I'll start listening to your stock picks.
SORRY- Full belated disclosure as of writing the original post and as of now I am long MO both with real money and in investopedia.
ReplyDeleteNacey- you obviously failed to recognize that 1) the DJIA had to drop Altria because it's splitting into 2 companies and the Dow 31 just doesn't have the same ring and 2) getting dropped from the Dow doesn't matter significantly to stock price. How many funds follow the DJIA? It's not like getting dropped from the S&P.
Your point on the simulator might be right, I don't know, if you are I'm up sht creek with my investopedia account.
Have patience with the call options, I made 37k today. And everything I've posted on my Bull Stocks has a solidly positive return to date. Look forward to seeing you throw a pick out, if youre up for it, instead of hearing your gypsy-like negativity.
haha,i love you light...you are like my azamat
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