Interesting chit chat, but the merits, or lack of, about tobacco and politicians can be debated and talked about forever. Who thinks MO will do what in 98 ? Just purchased shares as part of a dog of the Dow package. Would appreciate any feedback here on the future prospects. Predictions ?? Thanks all.
Congratulations on the buy, I think if you hold long term this stock is a fantastic investment. Thjere are so many reasons why this is a tremendous company but the easiest reason is the top-notch brands the company owns. also how can you go wrong with a company that has on its emblem the phrase " I came I saw I conquered."(veni vidi vici). The predictions I saw for 98 is dependent on whther there is a settlement. I've seen $65-70 short term all thw way up to $120 over 2 years after settlement. Even if there is no settlement I would guess this could be a $55 by years end.
Nice to see an investment-related post on this board.
I agree you've made a good purchase. As to 1998, I can't say. As to the long-term, I firmly believe the stock is at least a double from here. I have a two-stage discounted-free-cash-flow model that values MO at $98.00 based on a straight 5% growth rate, $151 with a 10 year growth rate of 10% followed by 5% thereafter. Their growth rate for free cash flow (net income + depreciation + amortization - capital expenditures) was 12.2% from 1985-1996, 6.4% from 1990-1996, which includes Marlboro Monday, etc. I use a discount rate of 7% (Treasury bill + 1%).
I expect little change whether or not the tobacco settlement goes through. If the settlement is approved, prices will increase and US earnings growth will stay the same, overall earnings to be enhanced by continued market expansion in Asia and Eastern Europe. If the settlement does not go through, I think MO, RN, et. al. will actually come out better in the long run: they will continue to settle with larger states (TX, CA, NY, etc.) but have the resources to outlast the smaller states in courts. I'd estimate the total settlement in that case to be around $100 - $150B, a lot less than the national settlement. Other than the UK and Canada, I see the little threat from additional worldwide litigation. Any litigation in UK and Canada will result in minor settlements. The rest of the world is more sensible and has better things to worry about.
Kraft foods will continue to do extremely well and will substantially add to earnings in coming years. Miller is coming on strong: they may have turned the brand around. MO doesn't waste capital, so you can be sure if Miller doesn't come around it will be sold or spun-off. They've unloaded the real estate business. They will continue to buy-back shares. Depending on the tobacco settlement, we may again not see a dividend increase in 1998, but I would then be confident of one in 1999.
I own the shares in the low-30s and have them on DRIP. If your holding period is long, I recommend putting them on DRIP, especially given the possibility for continued volatility in 1998.
My gut says to look for a good year. Low PE and strong brand loyalty and idetity. The shakeup overseas may slow grow a bit, but grow will continue. The yield is OK. A definite must in any portfolio. Good choice!