© Reuters. 2 Tobacco Stocks to Buy (Not Named Philip Morris)
Marlboro producer Philip Morris (PM) shifted its focus to mostly heat-not-burn (HNB) products last year to address concerns regarding high, national smoking rates. But the company has yet to receive FDA approval for its HNB offerings. Given this backdrop, we think tobacco stocks British American Tobacco (NYSE:) and Vector Group (NYSE:), which possess robust commercial product pipelines, are likely to deliver relatively higher returns than PM. No smoke; read on for details.Consumer staples have been witnessing a steady rise in demand and prices since the beginning of the COVID-19 pandemic last year, due in-part to panic shopping. The demand for tobacco products, which was declining typically by 3-4% annually in the United States, has also risen over the past year. The industry saw increasing numbers of smokers worldwide last year, likely due in some measure to stress introduced by remote lifestyles. Regardless, rising concerns regarding health worldwide have incentivized most tobacco companies to research and produce the next-generation smokeless products, which are expected to carry lower health risks.
Philip Morris International, Inc. (NYSE:), the producer top cigarette brand Marlboro, introduced heat-not-burn (HNB) tobacco products last year. PM has even partnered with Altria Group , Inc. (NYSE:) to make HNB products. However, the U.S. Food and Drug Association (FDA) has not granted approval to replace HNBs with regular cigarettes. So, we think it would be best to avoid PM for now.
As an alternative in sector, we think investors should focus on companies that have viable product pipelines, such as British American Tobacco PLC (BTI) and Vector Group Ltd . (VGR). These stocks have the potential to perform better than PM in the near term.
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