Five Tobacco Stocks to Buy

#4 Vector Group Ltd (NYSE:VGR)

– Hedge Funds with Long Positions (as of December 31): 18

– Value of Hedge Funds’ Holdings (as of December 31): $233.06 Million

There were 18 hedge funds tracked by Insider Monkey with long positions in Vector Group Ltd (NYSE:VGR) at the end of December, as compared to 17 registered at the end of the September quarter. Nonetheless, the total value of funds’ positions shrank to $233.06 million from $233.59 million quarter-over-quarter. Moreover, those 18 funds amassed 8.10% of the company’s outstanding shares on December 31, which represents the highest concentration rate among the five tobacco stocks discussed in this article. Vector Group is a holding company focused on manufacturing and selling cigarettes through the Liggett Group LLC and Vector Tobacco Inc. subsidiaries; selling electronic cigarettes; acquiring and investing in real estate properties or projects through its real estate business. Liggett is the fourth-largest manufacturer of cigarettes in the U.S. based on unit sales. Vector Group generated revenues of $1.66 billion during 2015, up from $1.59 billion reported for 2014. The increase was mainly driven by higher revenues from the real estate business, which more than offset declining revenues generated from the company’s cigarette and e-cigarette businesses. Reportedly, Vector Group’s e-cigarette business represents a possible takeover candidate for large-scale tobacco companies focused on entering the fast-growing “e-cig” industry. The company’s annual dividend payment of $1.60 per share denotes an attractive dividend yield of 7.03%. Shares of Vector Group have advanced 9% during the past 52 weeks. Renaissance Technologies also owns a stake of 6.03 million shares in Vector Group Ltd (NYSE:VGR) as of December 31.

#3 Reynolds American Inc. (NYSE:RAI)

– Hedge Funds with Long Positions (as of December 31): 31

– Value of Hedge Funds’ Holdings (as of December 31): $1.56 Billion

The number of top money managers from our system invested in Reynolds American Inc. (NYSE:RAI) declined to 31 from 33 in the December quarter. Similarly, the value of their equity investments in the company dropped to $1.56 billion from $1.95 billion quarter-on-quarter. Reynolds American is a holding company that owns and operates the following subsidiaries: R. J. Reynolds Tobacco Company, the second-largest tobacco company in the U.S.; Santa Fe Natural Tobacco Company, the second-largest smokeless tobacco products manufacturer in the country; American Snuff Company LLC; R. J. Reynolds Vapor Company, a producer of digital vapor cigarettes; and other entities. The company’s e-cigarette product, VUSE, is the top-selling vapor product in convenience/gas stores, controlling approximately 24% of the entire U.S. market last year. Reynolds American’s net sales for 2015 were $10.68 billion, increasing from $8.47 billion in 2014 due to strong growth in all business segments. The company’s RJR Tobacco segment, which accounted for roughly 81% of net sales in 2015, reached a growth rate of 27.6% last year due to higher volume, favorable product mix, and higher net pricing. Shares of Reynolds American are up by 40% in the past year and trade at a rather rich forward P/E ratio of 19.2. David Winters’ Wintergreen Advisors had 2.48 million shares of Reynolds American Inc. (NYSE:RAI) in its portfolio at the end of 2015.