Altria Group, Inc. (NYSE:MO)

CAPS Rating: 4 out of 5

The parent company of Philip Morris USA, Altria controls much of the U.S. tobacco market with Marlboro, Parliament, and other brands.


Player Avatar TMFInnovator (39.79) Submitted: 6/13/2013 12:52:22 PM : Outperform Start Price: $33.99 MO Score: +6.55

Although I'm not a fan of the tobacco industry in general, Altria is definitely poised to outperform the market long-term.

- Incredibly strong brand. Marlboro has been around since the 1920's and is the best selling cigarette brand in the world.
- Stickiness. Even though cigarettes are commodities, consumers are extremely brand loyal and almost always buy the same type.
- Pricing Power. Even though Altria is restricted to the US (Philip Morris International has the international rights) where cigarette volumes have been in constant decline, they still manage to raise revenues every year. How: pricing power.

Litigation risk is ever-present, but it is something that Altria has become accustomed to and can manage. Electronic cigarettes also have the potential to disrupt the industry, but Altria is launching their own ('MarkTen') that is rechargeable - to generate recurring revenue.

Altria pays a 5% dividend, has strong brand and pricing power, and is largely immune to technological disruption. All of these advantages help explain why it has been THE BEST performing stock of the past fifty years.

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