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Montag, 17. September 2012

Less Smoking: The Biggest Long-Term Risk To Altria

Von buycigarettes, 16:03

When buying a stock for the long haul, looking for long-term trends only makes sense. If people are starting to drink less Coke, then Coca-Cola (KO) is going to be considerably less attractive for the long haul. If people are switching from land phones to mobile phones, then investing in a company that focuses exclusively on those land phones is suddenly a pretty rough idea for the long haul.

When it comes to US tobacco investments like Altria (MO), what's the greatest long-term trend that is a huge risk? That people smoke less -- considerably less. And that's what we'll be analyzing here.

The Legal Risks Of Taxes And Regulations

Just recently, US tobacco companies had a huge victory in terms of free speech. The FDA tried to get them to put absurdly obnoxious "warning" labels on the packages to discourage the notion of tobacco being "cool" or something along those lines.

While regulations on smoking are disturbing from a personal liberty approach (I smoke cigars, and if they ban cigarettes, it's only a matter of time before cigars are impacted as well), it's even more disturbing from an investment approach. Here's a list of anti-tobacco moves and regulations that are getting worse by the decade:

Tobacco Taxes. A huge tax boom for tobacco has led to a historical drop in tobacco consumption. That's bad, but it's happening. Unavoidable. Over 3,000,000 fewer people smoke than in 2009... even though our population is larger. That's a huge, huge paradigm shift for tobacco investors.

Tobacco Bans. My state was one of the first to ban smoking in a public restaurant. I think it's a violation of choice (people who don't like smoke can just eat somewhere else). Either way, it's made it much more difficult for people to even regularly smoke in public. It's all part of a decades-long anti-smoking campaign that's finally paying dividends for the activists. Of course, the biggest risk is an outright ban. There's been a little chatter about it, but nothing substantial yet.

Tobacco Regulations. Regulations are getting stronger for tobacco, and they could continue to get stronger. Where you're allowed to smoke, what you're allowed to smoke, a ban on clove cigs -- it's all getting worse. And it'll probably keep getting worse.