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The top tobacco stocks for 2023 include British American Tobacco PLC, Vector Group Ltd. and RLX Technology Inc., which lead rivals for best value, fastest growth, and best performance, respectively.
Tobacco stocks as a group can be represented by the AdvisorShares Vice ETF (VICE), an exchange-traded fund, although VICE also holds a variety of other sin stocks besides tobacco companies. VICE has returned about 1% in the last year, while the Russell 1000 Index has increased by 3%.
Below, we look at the top tobacco stocks based on value, growth, and performance. Benchmark figures above are as of May 26, and all data below are as of May 23, 2023.
Best Value Tobacco Stocks
These are the tobacco stocks with the lowest 12-month trailing price-to-earnings (P/E) ratio. Because profits can be returned to shareholders in the form of dividends and buybacks, a low P/E ratio shows you’re paying less for each dollar of profit generated.
|Best Value Tobacco Stocks|
|Price ($)||Market Capitalization (Market Cap) ($B)||12-Month Trailing P/E Ratio|
|British American Tobacco PLC (BTI)||33.98||76.0||9.7|
|Altria Group Inc. (MO)||44.93||80.2||14.4|
|Philip Morris International Inc. (PM)||92.94||144.3||16.6|
- British American Tobacco PLC: British American is a British consumer goods company that manufactures and sells tobacco and nicotine products in the form of cigarettes, vapes, and oral products such as lozenges. British American shares have lost about a quarter of their value in the last year.
- Altria Group Inc.: Altria is a holding company that, through subsidiaries, makes and sells cigarettes, cigars, pipe tobacco, and related products. It also holds an equity interest in AB InBEV, the world’s largest brewer. The company’s stock has fallen nearly 20% in the last year amid allegations Juul, the e-cigarette company in which Altria once held a 35% ownership stake, marketed to minors. On May 10, Altria agreed to pay $235 million to settle 6,000 federal and state Juul-related lawsuits. The settlement does not resolve Juul-related antitrust litigation initiated by the Federal Trade Commission in April 2020.
- Philip Morris International Inc.: Philip Morris is a global tobacco company. It offers cigarettes as well as smokeless tobacco products, including heat-not-burn, vapor, and oral nicotine products. Shares of Philip Morris are down about 16% in the last year.
Fastest Growing Tobacco Stocks
These are the top tobacco stocks as ranked by a growth model that scores companies based on a 50/50 weighting of their most recent quarterly YOY percentage revenue growth and their most recent quarterly YOY earnings-per-share (EPS) growth.
Both sales and earnings are critical factors in the success of a company. Therefore, ranking companies by only one growth metric makes a ranking susceptible to the accounting anomalies of that quarter (such as changes in tax law or restructuring costs) that may make one or the other figures unrepresentative of the business in general. Companies with EPS or revenue growth of over 1,000% have been excluded as outliers.
|Fastest Growing Tobacco Stocks|
|Price ($)||Market Cap ($B)||EPS Growth (%)||Revenue Growth (%)|
|Vector Group Ltd. (VGR)||11.96||1.9||4.8||7.1|
|Altria Group Inc. (MO)||44.93||80.2||-7.4||-1.2|
|Philip Morris International Inc. (PM)||92.94||144.3||-14.7||3.5|
- Vector Group Ltd.: Vector Group is a holding company that, through its subsidiaries, manufactures and markets cigarette products. The company is also involved in real estate projects through one of its subsidiaries. For the first quarter of 2023, Vector reported 7% revenue growth, driven by an increase in tobacco segment revenues.
- Altria Group Inc.: See company description above.
- Philip Morris International Inc.: See company description above.
Tobacco Stocks With the Best Performance
These are the tobacco stocks that had the highest total return or smallest decline in price over the last 12 months.
|Tobacco Stocks With the Best Performance|
|Price ($)||Market Cap ($B)||12-Month Trailing Total Return (%)|
|RLX Technology Inc. (RLX)||2.23||3.5||19.3|
|Vector Group Ltd. (VGR)||11.96||1.9||9.3|
|Philip Morris International Inc. (PM)||92.94||144.3||-4.7|
|Russell 1000 Index||N/A||N/A||3.1|
|AdvisorShares Vice ETF (VICE)||N/A||N/A||1.1|
- RLX Technology Inc.: RLX Technology is a Chinese company focused on e-vapor products and services. The company engages in scientific research, technology, and product development, distribution, and related services. Shares of RLX spiked late in 2022 but have more recently fallen following disappointing earnings results for the latest quarter.
- Vector Group Ltd.: See company description above.
- Philip Morris International Inc.: See company description above.
Risks of Tobacco Stocks
There are many significant long-term risks associated with investing in the tobacco industry, according to the CFA Institute, a global, not-for-profit association of investment professionals that awards the Chartered Financial Analyst® designation. These include:
- Regulatory risk: There are 180 parties of the World Health Organization (WHO) Framework Convention on Tobacco Control (FCTC), the world’s first legally binding health treaty. They have committed to implementing a broad range of tobacco control measures to reduce the number of new smokers and to encourage current smokers to quit, in a worldwide effort to end the tobacco epidemic. New regulations aligned with these goals are being enforced all across the globe.
- Litigation risk: There are an increasing number of major class actions against the tobacco industry, challenging the assumption that governments will automatically pay for the sweeping health costs resulting from tobacco.
- Supply chain risk: Some tobacco companies may be reliant on child labor to produce their products, which is becoming unacceptable to investors.
- Reputation risk: The tobacco industry is consistently ranked as the world’s least reputable industry. As a result, individual and institutional investors increasingly avoid holding these stocks in their portfolios.
Advantages of Tobacco Stocks
Tobacco companies, which sell addictive wares, generate predictable cash flows. This can capture investor interest because it means strong dividends that hedge against rising inflation.
However, established companies in the sector such as Philip Morris and Altria will need to make progress in “less-risky” products such as e-cigarettes and vaping to drive real gains. But this is easier said than done: Altria backed one-time e-cigarette star Juul, only to see the startup mired in lawsuits for marketing to minors.
Ultimately, as discussed above in the section on the risks of tobacco stocks, regulators are likely to decide the fate of the tobacco industry, so future interest in the stocks may fade.
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As of the date this article was written, the author does not own any of the above stocks.