Reynolds American, Inc. (NYSE:RAI)

CAPS Rating: 4 out of 5

A parent company of R.J. Reynolds Tobacco Company; Conwood Company, LLC; Santa Fe Natural Tobacco Company, Inc; and R.J. Reynolds Global Products, Inc.

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Player Avatar divinezone (50.98) Submitted: 11/6/2011 10:05:45 PM : Outperform Start Price: $37.00 RAI Score: +8.10

Buffett famously explained why he finds the tobacco industry an attractive investment: "It costs a penny to make. Sell it for a dollar. It's addictive. And there's fantastic brand loyalty." Even though this quote is from the 80s, and there is much more scrutiny on the industry now, this logic is still hard to refute. With a dividend yield at nearly 6%, this number has to be expected to fall as investors seek out investments paying high rates of interest...especially investments that also include an ownership stake in the company itself, like stocks. With some international exposure in smoker-infested Europe, brand names like Camel and Winston (and a slew of others), and having penetrated very well into the growing smokeless tobacco business, Reynolds is poised to very well against the market in the years to come.

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