Investments

Amid Tech Giants, Big Tobacco Lights Up Stock Market

Wall Street

Investors tend to get swayed by smoking-hot tech stocks. But what about smoking-hot smoking stocks?

Bloomberg reported that among the biggest names in the Standard and Poor’s Index, which sports a broad swath of industries, tech may be the marquee group behind the first-quarter 5.6 percent gain. But the performance of the S&P as a whole is not carried just on the shoulders of companies such as Amazon. An old-guard name, about as old-guard as it gets, has been right up there with the household names that dabble in bits and bytes.

They don’t call it “Big Tobacco” for nothing. Philip Morris International notched a 3.3 percent gain for the quarter, placing the firm as number four in the index as measured by market cap, behind Apple, Amazon and Facebook. The stock recently fetched $112 and held a market cap of $175 billion. That comes on the heels of 23 percent gains last year.

Among the reasons that PM (that’s the ticker) has gained ground this year: The cigarette maker may be increasingly viewed as having tech-focused plans, as Bloomberg reported, predicated on a smokeless roadmap, tied to what is known as heated tobacco. Investors may also be cheered by dividends, a relatively low effective tax rate (which, of course, helps profits) and international presence that helps insulate the firm against the shocks that might come with any single economy.

As for the movement beyond burning tobacco leaves and inhaling them, the company has been spending billions of dollars on IQOS, which is a smokeless cigarette and has been termed “heat not burn.” Pending the status of applications that are in place with the Food and Drug Administration, IQOS could be on U.S. shelves within the next year, said the newswire.

The name is popular, too, as more than 30 percent of mutual funds (as measured by Bank of America) hold the stock, but even then PM shares have room for uptake, as they are not among the top five names within consumer staples held by the mutual fund industry at large, Bank of America estimated. As for the potential buying activity for the future, Savita Subramanian, who serves as chief U.S. equity strategist at Bank of America, said in a report issued last week that “managers increased their exposure in tech again this month, bringing its relative weight to the second-highest level in our data history. In contrast, staples and utilities are currently at record underweights.”

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