Philip Morris International (NYSE:PM)

CAPS Rating: 4 out of 5

The company manufactures and sells cigarettes and other tobacco products in markets outside of the United States.

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Member Avatar mwaqar (< 20) Submitted: 4/22/2014 3:43:52 AM : Outperform Start Price: $83.35 PM Score: -0.12

Big upside

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Member Avatar afewgoodstocks14 (61.24) Submitted: 4/10/2014 4:21:58 PM : Outperform Start Price: $81.99 PM Score: -1.57

Div. (Yield) $3.76 (4.5%)

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Member Avatar 20Punches (43.57) Submitted: 4/1/2014 3:33:06 PM : Outperform Start Price: $81.92 PM Score: +1.89

Punch #10 - Q12014 – will be Phillip Morris International (PM)

“I'll tell you why I like the cigarette business. It costs a penny to make. Sell it for a dollar. It's addictive. And there's fantastic brand loyalty.” – Warren Buffett

Phillip Morris International sells Malboro, and other brands, in all available markets outside of the U.S. The old Phillip Morris (before the MO and PM split) was (I’m fairly certain) the most profitable stock of the 20th century.

The industry has gotten a lot of negative press (even moreso than usual for the tobacco industry) due to increased anti-tobacco activism. These issues are nothing new for PM, and the tobacco company shareholder *should* continue thrive for at least another generation or two, in my opinion. As the industry slowly declines, PM’s dominant position will probably continue to widen. It’s extremely unlikely that any new, meaningful competitors will enter this industry, and PM stands poised to swallow up smaller competitors as the industry slowly declines. It may seem odd, but PM’s moat is actually strengthened by a slowly declining industry. (See Bruce Greenwald’s book “Competition Demystified” for more on that phenomenon) These recent sell ratings, general tobacco pessimism, and PM’s relatively poor stock performance (PM has been flat while that market is up over 35% over the past 20+ months) are all BUY signals, in my view.

While overall volumes will surely decrease overtime, price increases should be more than able to compensate, so revenue should remain pretty steady for the foreseeable future. Any tax increases imposed can be easily passed down to the customer as well. Virtually no business has pricing power as extreme as PM does. Also, they operates in so many countries, that it is pretty well diversified from individual regulation. The economics of PM are so insanely good, that per-share profits should continue to increase for the foreseeable future, albeit much more slowly than they have in the past. Also, don’t forget that tobacco companies provide A LOT of tax revenue to the countries they operate in, and most governments really need revenue right now. It is not in any governments economic interest to make smoking illegal.

Consider this scenario: if net income grows at just 4% per annum over the next 5 years, and buybacks continue at 4% of shares outstanding per annum – both reasonable assumptions - than EPS will grow to around $7.83 over the next 5 years. Put a reasonable 15x multiple on that, you get a share price around $117 in 5 years. If you put a conservative 4% per annum growth rate on the dividend as well, PM will pay you about $20 in dividends over the next 5 years. $117 + 20 = $137 total return, which from today’s price of $81.92, translates into a 10.8% annualized total return.

That's just one of many possibilities, but considering rational range of outcomes for PM, vs that of a realatively more expensive S&P 500 (which historically returns 6-8% per year including dividends), I think PM has a very good chance of outperforming for the foreseeable future, particularly if the market doesn’t do very well overall.

And, perhaps more importantly, if I’m wrong, you’ll still do ok. (4.9% forward dividend yield provides significant downside protection as long as profits remain stable)

This, like all 20punches picks, is intended to be an asymetrical bet - heads you win big, tails you still do ok.

PM outperform.

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Member Avatar MrMonopoly (71.10) Submitted: 3/25/2014 12:51:26 AM : Outperform Start Price: $79.68 PM Score: +4.03

The export of hipsters is booming, but they might ironically smoke e-cigs.

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Member Avatar BaseBawl (42.60) Submitted: 3/14/2014 11:44:57 AM : Outperform Start Price: $79.32 PM Score: +4.10

Buybacks and dividend growth.

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Member Avatar Gervais001 (65.41) Submitted: 3/12/2014 10:14:21 PM : Outperform Start Price: $78.19 PM Score: +5.21

In an age of declining cigarette sells in the US, Philip Morris is still growing markets over seas. Smart decision making by management has filled the coffers to over-flowing. Even if sells decline at a rate of 2-3% in the US this will be more than off-set by the growth overseas. With such free cash flows, growth of dividends is almost guaranteed with maybe a special dividend in the works.

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Member Avatar Gardetto (< 20) Submitted: 2/15/2014 11:19:16 PM : Outperform Start Price: $79.27 PM Score: +3.37

Philip Morris International has been battered over the last few months but will be buoyed by it's nearly 5% dividend yield. Although there are no major catalysts in the near to medium term for significant capital appreciation, I'm confident the stock is a good place to park some loose change over the next several months.

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Member Avatar Guru (< 20) Submitted: 2/10/2014 12:21:51 PM : Outperform Start Price: $78.08 PM Score: +2.37

PM will gain significantly with impending recovery in Europe, Asia and Latin America.

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Member Avatar freecapital (74.78) Submitted: 2/5/2014 5:14:54 PM : Outperform Start Price: $75.98 PM Score: +2.93

http://boards.fool.com/fka-pm-31099935.aspx?sort=whole#31103514

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Member Avatar jsch08 (32.57) Submitted: 1/28/2014 11:26:18 AM : Outperform Start Price: $79.81 PM Score: -0.42

People still smoke

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Member Avatar sagitarius84 (< 20) Submitted: 1/24/2014 6:58:50 PM : Outperform Start Price: $80.68 PM Score: -1.37

PM has attractive valuation, earnings growth, buys back stock, pays an above average and growing dividend. It is a cash machine to hold for the long run

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Member Avatar Presbyopia (54.59) Submitted: 1/9/2014 2:15:45 PM : Outperform Start Price: $83.85 PM Score: -3.36

At today's current trading price of $83.27 PM is in oversold territory by many measures including RSI, Williams, slow and fast stochastics. It is now trading at its February 2012 opening price despite the fact that 2 years ago PM's earnings were much lower and the dividend pay-out was dramatically lower than the current pay-out. These indicators alone should catch any investor's attention to at least look a little closer at one of the all time leading stocks for producing great investor returns. There is nothing on the horizon from the Board of PM that would indicate in any way that such a dramatic drop in its stock price is justified. I would rate this stock right now a strong buy. If you are a nervous and extremely cautious investor then my recommendation would be to sell a put contract equal to the number of shares you want to own. For example, if you want to own 100 shares of PM that is currently sporting a dividend return of x%, I suggest you sell 1 put contract (100 shares) with a January 2015 strike price of $82.50 which will generate a put premium into your investment account of $6.40 per share (a 7.8% return on a 12-month put contract). At best the price of PM will still be $83.27 one year from now and you will have collected $6.40 in a put premium and at worst you will be assigned next January at $82.50 thereby leaving you with a cost base of $76.87/each for your shares. Assuming the dividend is still $3.76 that will leave you with a dividend yield of 5% on your investment and purchase price per share not seen since October of 2011.

For the sake of clarity, I do NOT own any shares of PM currently but I am seriously considering implementing the above strategy despite my objection to holding shares in a cigarette manufacturer.

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Member Avatar jamaral11 (74.59) Submitted: 1/2/2014 11:03:08 AM : Outperform Start Price: $85.48 PM Score: -4.62

dividends

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Member Avatar afewgoodstocks11 (32.43) Submitted: 12/30/2013 11:38:05 AM : Outperform Start Price: $60.90 PM Score: -19.03

Div. (Yield) $3.76 (4.3%)
Current Yield . . . . . . .6.10%

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Member Avatar mek251 (96.25) Submitted: 11/23/2013 11:22:52 AM : Outperform Start Price: $60.47 PM Score: -6.62

This is really a no brainer. MO has been around forever, pays a nice dividend, and has outperformed the market for ages. PM is even better, with its focus overseas.

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Member Avatar slider10 (< 20) Submitted: 11/6/2013 1:34:15 PM : Outperform Start Price: $88.96 PM Score: -12.16

Probably entering a slower growth phase than the past few years, but should still outperform the market. The company seems to be one of the better ones as far as dividends + stock buybacks.

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Member Avatar enable1 (< 20) Submitted: 10/4/2013 3:55:54 PM : Outperform Start Price: $85.05 PM Score: -12.99

Despite dire warnings, sales continue to rise, especially in Asia, Africa, and in underdeveloped countries. Habit will overcome common sense anytime!

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Member Avatar 10x2 (51.84) Submitted: 10/3/2013 11:04:19 PM : Outperform Start Price: $85.47 PM Score: -14.23

Analysts predict 10-11% growth next year. I think that's about right. After that I'll venture a guess of 6-8% annually. That with a 4% dividend should provide an above average return over the next several years unless there is severe PE contraction for the stock. It suits my strategy for this portfolio. I'll hold it for a year and look again.

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Member Avatar DeusExMachina8 (52.84) Submitted: 9/16/2013 3:38:37 PM : Outperform Start Price: $85.77 PM Score: -12.34

A hefty dividend with increasing payouts annually along with stock repurchases and the huge potential for growth in worldwide markets that are opening up to the marketing and sales of PM's products makes this stock seem like a sound investment to me.

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Member Avatar jamis2001 (46.64) Submitted: 9/13/2013 4:12:31 PM : Outperform Start Price: $85.77 PM Score: -12.34

Plenty of market share left for PM. No stopping Marlboro

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