This “Bad and Ugly” Stock is Actually Good

The stock I’m about to tell you about isn’t for everyone. 

I mean, from an investment perspective it’s great.

But well…

It’s core business isn’t exactly one that has a great association with society.  

So which stock am I talking about?

Philip Morris International (NYSE: PM).

Philip Morris International is the world’s second biggest tobacco company (so you understand why I’m saying it’s not for everybody)

But business is business. And Philip Morris International is good at business.

PM controls some of the top names in tobacco. Heard of Marlboro? That’s one (in fact, Marlboro is #1 in the cigarette world). They also control five other brands that are among the top 15 cigarette brands in the world.

And even though cigarettes are falling out of favor in the U.S. and Europe, the company has maintained solid growth levels.  Here’s how…

First, they continued to increase sales in international markets where cigarette smoking is still a popular choice. Remember, almost 1 billion people still smoke worldwide.

But more importantly, they branched out into new smokeless products, like e-cigarettes. They’ve recently dumped $6 billion into smokeless acquisitions and product development, setting the stage for this to be where the company could garner the bulk of its future growth.

A recent study just suggested that e-cigarettes are less associated with cardiovascular and pulmonary diseases compared to cigarettes. A doctor involved in the study had this to say:

“These results are a powerful addition to the evidence showing that switching to e-cigarettes is a much better choice than continuing to smoke…. This study truly is a landmark study, not just demonstrating the reduced toxicity and disease risk between e-cigarettes and cigarettes but also evaluating the role of nicotine and flavors.”

This study could appeal to American, European, and international fence-sitters not sure about whether to try e-cigarettes. It could even ease political opposition to the company. With a new health-conscious market, this study’s results could push Philip Morris even further up the leaderboard.

And in fact, Scott Gottlieb, the recent Food and Drug Administration Commissioner, just stepped down. He was known for his tough opposition to cigarettes and his departure could open up a smoother market and political climate for Philip Morris.

All in all, the strategic masterstrokes have resulted in Philip Morris being the classic reference on how to expand to new markets.

Indeed, if you remove China (because their tobacco business is dominated by a state-run firm), Philip Morris claims a hefty 15% global market share. It doesn’t matter what industry you’re in, it’s very hard to find companies that command such market dominance.

Now, for some numbers and fundamentals…

The company’s operating margin sits at approximately 39%. Its dividends have increased almost 150% over the past decade. And Wall Street analysts project shares could rise to a high of $105.00.

So to wrap everything up, Phillip-Morris offers a dominant market position, it’s growing, has consistently increased dividends, and enjoys strong pricing power (their customers are addicted, after all).  This could be a worthy addition to your portfolio — you know, if you don’t mind its business.

-Investing Insider Magazine

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