Lorillard Inc. (LO), Reynolds American, Inc. (RAI): The FDA Presents Another Great Buying Opportunity

Bottom line

As I mentioned before, Lorillard Inc. (NYSE:LO) is the best investment on a number of fronts. This includes valuation, volatility and dividend.

Up until mid-2011, the three tobacco companies actually traded inline with each other, and since the FDA overhang, Lorillard has been trading below the industry.

The FDA scare arose back in 2011, where the tobacco industry has been resilient through the years, showing remarkable innovative powers and I don’t think that will change anytime soon.

All three tobacco companies have been diversifying their revenue streams and expanding their portfolios. The beauty about the tobacco industry is that its products are highly addictive, providing for stable revenue. This industry has grown revenue over the years despite a 3% annualized decline in cigarette consumption over the past decade. Growth in e-cigarettes could be the next big growth avenue for these stocks.

All in all, it’s not that I don’t like Altria Group Inc (NYSE:MO) or even Reynolds American, Inc. (NYSE:RAI), I just like Lorillard Inc. (NYSE:LO) better given its valuation. Altria and Reynolds both trade with PEG ratios of 2, while Lorillard’s is at 1.1. 

The article The FDA Presents Another Great Buying Opportunity originally appeared on Fool.com.

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