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Valyooo (99.63)

When the hell do I pull the trigger on PM?

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April 01, 2011 – Comments (15) | RELATED TICKERS: PM

Is anybody good at reading this stocks price movement?  I sure am not.  I have been wanting to buy it for the long haul for months now but I keep thinking its too expensive, yet it keeps going higher.  I won't chase it because its not a momo name.  Is 16.7x trailing and 13.3 x forward P/E too high for a stock like this? I am so bad at finding the right P/E for a "stalwart"

15 Comments – Post Your Own

#1) On April 01, 2011 at 1:34 PM, mm5525 (< 20) wrote:

I think you have to close your eyes and simply buy it whenever the USD gets a pop, like today with the good US jobs report. The USD rallied for the first time in awhile, but that rally has already fizzled. I bought more PM last summer at 49 when PM was getting hurt by the Greek debt crisis. If for some reason Trichet does not raise rates, you could probably buy it then when the USD gets another pop. Of course if we get another chaotic even such as the Japanese earthquake tragedy would be an excellent time to buy as PM got sold off by about $1.71 in one day before rallying. Regardless, I firmly believe two things: The USD is going down, and PM is going up. I follow PM very closely as it is by far my #1 holding. Another idea is to buy the morning it goes ex... at least you'll get it 64 cents cheaper and hope the overall market is weak that day to where you will get it a little cheaper than that. I think you need to simply close your eyes and get in while we're still in the 60s. PM has been on a rocket ship as of late. I used to dream of making it back to 50 where it started at spinoff. Now we're flying right through the 60s. Soon I think we'll see 70. Their earnings power is enormous, and the weak USD will only help. I think it's safe to say the USA will be the last major country to raise rates.

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#2) On April 01, 2011 at 1:45 PM, Valyooo (99.63) wrote:

Very good analysis, thank you.  I will start a position now and add to dips.

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#3) On April 01, 2011 at 2:09 PM, mm5525 (< 20) wrote:

Well, let me rephrase one thing - I think Japan will be the last country to raise rates due to the quake. Had that not happened, the US would be dead last and still very well could be. To me, the USD is going down regardless overall - if the economy gets better, there will be more appetite for risk overseas, and if the economy gets worse, we get QE8. To me, PM is a massively well-hedged mutual fund selling a recession-proof product spread out over dozens of currencies with still a 3.93% yield at these levels and massive buybacks from management. The Asia-Pac region has a rapidly growing middle class, and even Goldman came out and upgraded PM the other day due to the weak USD and massive Asian exposure. They see 74. I don't trust anything they say, but I do hope they're right in this case! Plus, look at the Euro... even with all the chaos over there, the Euro is $1.42!! PM has 40% of its earnings coming from there. Plus, the damage to Japan has hurt their domestic tobacco company, JTI, Japan Tobacco International, who is the 3rd largest tobacco co. PM sustained damage to 4 of their 28 distribution centers in Japan, but 2 are already back on their feet. They posted some article about this on 3/28 saying the damage to PM's earnings are negligible. Smoke 'em if ya got 'em, Valyooo, nice to have you aboard what is IMO the best equity on earth to own.

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#4) On April 01, 2011 at 2:28 PM, chk999 (99.98) wrote:

The way I handle things like this with real money is I buy a marker position. (Like a couple of shares or so.) Then I figure out what I'd be willing to pay for more of it and set a limit buy order at that price. (Use odd cents like 20.01 because everybody puts in limit orders at even amounts.) If I get a fill, great! If not, I'll wait for my price.

Remember, you will get a chance to buy great companies at better earnings yields, you just have to be patient. 

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#5) On April 01, 2011 at 3:01 PM, jesusfreakinco (29.12) wrote:

Close your eyes and by the dips on silver.  This morning was a great buying opportunity when the EE hit G/S on the NFP number (which they've done quite often over the past few years).

http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2011/4/1_Turk_-_Record_Silver_Backwardation_Spells_Danger_for_US_Dollar.html

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#6) On April 01, 2011 at 3:04 PM, Valyooo (99.63) wrote:

CHK, due to people like you, I usually make mine $20.02 haha.

MM, thanks for your insights, and I am glad to be on board.  I just wonder how much bigger PM can get, they are already huge.

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#7) On April 01, 2011 at 3:22 PM, mm5525 (< 20) wrote:

LOL, I bought some more PM today since I wrote a novella here about it... and my limit order was $65.22. Just filled it. I managed to sell myself on buying more!. I do agree the best way to buy or sell is making the limit not a common, rounded number like $65.20, but rather then $65.22's of the world, etc.  

You're more than welcome, Valyooo. PM can get a ton bigger if they can have more than the existing partnership they have with the Chinese government-owned tobacco co. PM is schmoozing all they can to try to sell their products there in China outright, but the Chinese obviously want to dominate their market. PM is lucky to even have what they have there... so hopefully we get more. If PM gets the outright green light there, the EPS potential is enormous!  

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#8) On April 01, 2011 at 3:31 PM, Valyooo (99.63) wrote:

Hey, do you have any particularly good articles where I can read about the situation with PM and chinese government tobacco?

Also, what kind of DD do you do on PM?  I usually try to do a decent amount but this was such a no brainer to me.  I will listen to conference calls, but do you find it necessary to read 10-k's for them?

 

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#9) On April 01, 2011 at 4:17 PM, mm5525 (< 20) wrote:

I listen to every CC, but don't read the 10ks. I have been long MO/PM/KFT for over a decade, and I simply trust mgmt's  ability to make money by now, although I did sell all the MO due to the FDA collar, anti menthols, anti advertising, USD decline in favor of putting more into PM. I post extensively on the PM Board about the last CC where they are really doing well in Indonesia, Philipines, Singapore, Latin America, Korea, the joint venture with China. Pretty much doing great everywhere except Greece, Turkey, and the Ukraine due to massive unemployment. Also, PM has been buying back 12Billion of their shares since their spinoff from MO in March 2008, and this last CC they announced a 5Billion buyback just this year alone!! I adopt the Warren Buffett line of only investing in things I understand, and when I listen to a CC from PM, I feel like I understood absolutely everything discussed.

Articles (keep in mind this merger/partnership commenced  back in 2005 when PM was still a part of MO):

http://articles.moneycentral.msn.com/Investing/CompanyFocus/TheMarlboroMenGoGlobal.aspx

http://www.tobaccofreecenter.org/files/pdfs/en/IW_cntc_pmi_bg.pdf

http://www.cigarette-store.org/info/philip-morris-companies-inc

http://www.atimes.com/atimes/China_Business/HC10Cb01.html

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#10) On April 01, 2011 at 6:47 PM, Valyooo (99.63) wrote:

Thanks a lot.  I will add you to my favorite players.

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#11) On April 01, 2011 at 6:57 PM, Valyooo (99.63) wrote:

Its just hard imagining a lot of growth from a 116 billion dollar company. Maybe they can be a multi trillion dollar company in 15 years?

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#12) On April 01, 2011 at 7:54 PM, Bobjitsu (65.28) wrote:

My biggest position is MO, I'm gonna make my first purchase of PM soon. Do you guys see a split coming soon on PM?

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#13) On April 01, 2011 at 11:05 PM, mm5525 (< 20) wrote:

I see massive growth for PM due to the population growth and income/wealth growth of the emerging markets alone, let alone what PM is doing on it's own via marketing/acquisitions. Look at India, the Asia-Pac and the Middle East, for example. Rapidly growing populations, and I hear over and over in the WSJ and other publications about how young the people are in these parts of the world. More people = more smokers. PM's earnings are pretty well insulated due to the buybacks as well. I think PM will continue to do massive buybacks for the next several years. I think we will be earning over $5.00 EPS per year by 2014-ish. PM is currently paying out 65% of their EPS as  dividends, and they follow the MO m.o. of raising like it always does in Q3. Last September they raised it from $0.58 to the present $0.64. Those will be some sweet dividends (not that they aren't already) when we are making over $5.00+ per share and beyond. That's why PM is a no-brainer, as you admit above early on in our postings today IMO.

I also am firmly a believer in PM's management team. These guys obviously were all at MO pre spinoff, and know how to make acquisitions, and also know when to walk away such as in the case down in Colombia recently. I see smart acquisitions continuing, thusly adding to EPS in time.  

As far as stock splits, they'll certainly do it eventually like they did with MO a few times through the years. I don't think they'll do it any time soon, though. I think we'll have to get close to $80 before a split happens. Not sure why I think that... other than I think they would want their price to still be in the 40s even after a split. Just sounds like a "better" stock to still be sort of costly. Just my opinion.

Above all, I am amazed at how rarely PM is ever talked about on the likes of CNBC, Bloomberg, FBN or even the WSJ. It is such a mega cap one would think it would get more love than it does. Of course, I like the fact it flies under the radar screen though, too. Smart money doesn't need the pub.   

  

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#14) On April 02, 2011 at 1:15 PM, awallejr (82.72) wrote:

Another way to play it is to sell puts at or lower than a stock's current price.  Some interesting choices for Jan 2012 or Jan 2013.  Worse case you are forced to buy PM at a discounted price.  Otherwise you keep the premium and rinse, repeat.  Of course you will have to have the financial ability to actually pay should you be forced to buy.

I've sold a lot of puts last 2 years and have yet to be called to buy (not that I would mind either since they are off companies I own or owned already).

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#15) On April 07, 2011 at 3:42 PM, rastapatch (< 20) wrote:

PM trades at 65. Buy some soon, and set a limit to buy more.

If it raises 10% set a limit under it, and a buy limit to buy more.

And absolutely try to sell puts, and if they are called buy more.

And buy some MO also, and then set a limit order to buy more.

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