Five Tobacco Stocks to Buy Right Now

#3 Reynolds American, Inc. (NYSE:RAI)

– Hedge Funds with Long Positions (as of June 30): 40

– Value of Hedge Funds’ Holdings (as of June 30): $1.47 Billion

Moving on, Reynolds American, Inc. (NYSE:RAI) also saw its ownership among investors covered by us inch up by one during the second quarter. However, the aggregate value of their holdings in the company shrunk by $224.4 million during that period. Shares of the make of ‘Newport’ and ‘Camel’ cigarettes have appreciated by 158% in the last five years though they are currently trading flat for 2016. The company recently hiked its dividend to $0.46 per share from $0.42 per share, which translates into an annual dividend yield of almost 4%. Most analysts who track Reynolds American, Inc. (NYSE:RAI) have an optimistic view on it citing the relatively lower valuation compared to its peers and its strong fundamentals. Though a lot of those analysts acknowledge that the sales volume of the company isn’t going to rise due to the decreasing demand of tobacco products, they think that the company can still increase its margins through cost reduction measures.

#2 Altria Group Inc (NYSE:MO)

– Hedge Funds with Long Positions (as of June 30): 46

– Value of Hedge Funds’ Holdings (as of June 30): $1.90 Billion

Amid a 10% rise in its stock during the second quarter, the number of hedge funds covered by us long Altria Group Inc (NYSE:MO) increased by five and the aggregate value of their holdings jumped by $143 million. One of the hedge funds that boosted its stake in the company significantly during that period was billionaire Ken Griffin‘s Citadel Investment Group, which increased its holding by 281% to 900,237 shares. Although Altria Group Inc (NYSE:MO)’s stock has given up a large chunk of the gains registered during the second quarter since the beginning of July, it is still trading up by 8% year-to-date. The company has been hiking its quarterly dividend every year for the past 47 years and recently raised it by 8% to $0.61 per share, which gives the stock an annual dividend yield of 3.84% based on the stock’s last trading price. Altria Group currently accounts for over half of the retail sales of cigarettes in the U.S. However, many analysts feel that amid a consistent decline in the consumption of tobacco products, the company must increase its focus on its alcohol business in order to make up for the loss of revenue from cigarette sales in the future.

#1 Philip Morris International Inc. (NYSE:PM)

– Hedge Funds with Long Positions (as of June 30): 47

– Value of Hedge Funds’ Holdings (as of June 30): $4.62 Billion

Philip Morris International Inc. (NYSE:PM) continued to remain the favorite tobacco stocks at the end of June among hedge funds covered by us even though the number of funds long the stock declined by one during the second quarter. Nevertheless, the aggregate value of their positions rose by $731 million during the quarter. Shares of the tobacco giant performed extremely well during the first-half of this year and managed to break above the $100 mark for the first time in their history. Owing largely to the gains it made during the first six months, the stock is currently trading up by nearly 10% year-to-date. The company is expected to report its third-quarter results by the end of the next month and the current consensus estimate among analysts includes EPS of $1.22 on revenue of $7.06 billion. For the same quarter of the previous financial year, Philip Morris International Inc. (NYSE:PM) had reported EPS of $1.24 on revenue of $6.93 billion. On July 15, analysts at Goldman Sachs Group reiterated their ‘Neutral’ rating on the stock, but increased the price target to $105 from $99.

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