MO - Altria Corp

[DooDiligence]

I just listened to the conference call, post Juul deal, & I'm now firmly convinced that Howard Willard is even less capable of proper due diligence than I am.

 

I would however conclude that he has a more vivid imagination than I do.

 

Citi analyst Adam Spielman was the only analyst who asked any hardball questions & he was rebuffed.

 

https://www.barrons.com/articles/pfizer-merck-hit-by-analyst-downgrades-51548278701

 

I'm going to hold, because I'm an idiot who is succumbing to sunk cost fallacy.

[Spekulatius]

I have got to say, these tobacco stock cigarette butts start to look interesting. I am looking specifically at BTI and MO. BTI has the mental issue to content with. I did learn from their IR presentation that the cigarette consumption is correlated to gas prices ( discretionary income ?) and was a headwind that should reverse now that gas has become much cheaper.

 

No position yet, but stock market trainwrecks always are of interest, imo.

[kab60]

Agree. Just not sure which one is most interesting - I'd prefer a cannibal instead of dividend growth. My thinking is that during the last 50 years this and that was supposed to kill big tobacco. The only ones getting killed are their customers (I know, awful). At these levels I think it is a got bet it stays that way and/or price makes up for lost volume. As a business model, it is frickin' amazing. Sure, there's churn when customers die, but this is recurring revenue that makes SaaS companies jelous.

[frommi]

I looked a bit deeper into the issue of volume decline rates. It looks like Nielsen data shows a decline rate of -7 to -8% for october and november of 2018, which is probably the basis for all the analyst downgrades in the last weeks. According to JUUL, it has to do with its own product being so successful: https://newsroom.juul.com/2018/12/20/cigarette-decline-rates-accelerate-as-juul-share-grows/

 

But it looks like the Nielsen data is at least questionable:

 

Another important note from Herzog and team is that channel checks conducted by Wells at convenience stores indicate cigarette volume isn't trending as bad as feared (-3.2% vs. -8.2% Nielsen data).

 

Maybe Altria management panicked because of the data?

I will watch this closely and if the decline is really that much and is confirmed by Altria`s own data and doesn`t get better in Q1 2019 i will re-evaluate my position here.

 

[DooDiligence]

I looked a bit deeper into the issue of volume decline rates. It looks like Nielsen data shows a decline rate of -7 to -8% for october and november of 2018, which is probably the basis for all the analyst downgrades in the last weeks. According to JUUL, it has to do with its own product being so successful: https://newsroom.juul.com/2018/12/20/cigarette-decline-rates-accelerate-as-juul-share-grows/

 

But it looks like the Nielsen data is at least questionable:

 

Another important note from Herzog and team is that channel checks conducted by Wells at convenience stores indicate cigarette volume isn't trending as bad as feared (-3.2% vs. -8.2% Nielsen data).

 

Maybe Altria management panicked because of the data?

I will watch this closely and if the decline is really that much and is confirmed by Altria`s own data and doesn`t get better in Q1 2019 i will re-evaluate my position here.

 

My reasoning may be fuzzy, but continues to be based on the idea that they are moving into an industry (vaping, AND they're paying a shit ton of money to do it) which will likely face the same challenges in civil courts which cigarettes faced (dubious marketing tactics with an unhealthy product.)

 

The same could be said about weed although there don't seem to be significant parallel challenges from drinkers.

 

Additionally, the fact remains that weed is still on schedule 1 so what are the implications there? Just because something is legal in another country doesn't mean you can't be prosecuted in the US, yes or no? Should've waited for removal of schedule 1 status AND once again, overpaid for a pig in a poke.

 

I'll reiterate my idea that they should simply manage their declining cigarette business & use the massive FCF to shrink the equity base & maybe make acquisitions related to alcohol.

 

Too late for that now.

 

Coming soon:

 

Big fat pats on the back for management.

Big fat pats on the pockets of shareholders.

 

I hope I'm wrong but hope is never a reliable ingredient in an investment thesis.

[Spekulatius]

MO should absolutely get inzo the weeds <g>. It’s a very similar product and is getting regulated at some point by the federal government instead of the states. I just don’t think they should be able to build it themselves and shouldn’t have to pay billions to acquire an organization that is small and heals together by shoestrings and duck tape figuratively speaking.

 

E-cigs likely will replace tobacco combustible products, do I think they should get into this business as well. It’s just a matter of how and how much to pay for it. I can understand thenprice payed for JUULS better then the price payed for the weed business.

[DooDiligence]

I've tried to figure out if the big price drop since my purchase of MO is the reason for my anger at the recent purchases of minority stakes in Juul & Chronos and have concluded that they contribute but are not the main cause.

 

I simply believe that the Juul stake takes the business in the wrong direction.

 

I'll remain long because I hate to take a loss & I'm simply hoping that 1 of 2 scenarios will pan out (is this what thesis drift means?)

 

1. The company will post mediocre returns over the next 5 years & I'll at least break even.

 

2. I'm wrong and they'll avoid civil litigation over vaping or it won't hit them for another 10 years after studies on health risks are concluded & maybe MJ will get removed from schedule 1 status & the industry roll up will get executed.

 

---

 

Shifting back into bearish/troll mode, let's take a stroll down memory lane.

 

Does anyone here remember candy cigarettes?

 

Guess what? You can still buy them!

 

https://www.amazon.com/Candy-Cigarettes-24-Count-Boxes/dp/B003X3DMLK/ref=pd_lpo_vtph_tr_t_2?_encoding=UTF8&psc=1&refRID=5YZ6B73ZJCEBG03FQEW3

 

https://www.washingtonpost.com/outlook/2018/09/23/like-tobacco-industry-e-cigarette-manufacturers-are-targeting-children/?utm_term=.8ee332dcb892

[frommi]

Do you have any studies that show real health problems with vaping? Right now from all i know is that it is not more dangerous than drinking coffee, coke or alcohol. Nicotine is just a stimulant like caffeine/sugar, so that is not the root of any problems, as long as you don`t use it excessivly.

If it helps you gain some confidence read https://lt3000.blogspot.com/2019/01/the-art-of-worldly-wisdom-smoking-and.html . I think that is a really good article over investing in tobacco.

[Foreign Tuffett]

Do you have any studies that show real health problems with vaping? Right now from all i know is that it is not more dangerous than drinking coffee, coke or alcohol. Nicotine is just a stimulant like caffeine/sugar, so that is not the root of any problems, as long as you don`t use it excessivly.

If it helps you gain some confidence read https://lt3000.blogspot.com/2019/01/the-art-of-worldly-wisdom-smoking-and.html . I think that is a really good article over investing in tobacco.

 

When I looked into this several months ago I couldn't find any solid evidence that vaping is harmful to healthy adults. It's well known that nicotine itself is fairly innocuous, other substances in cigarettes are the causes of the negative health effects.

 

While I believe nicotine is technically a stimulant, it's wrong to equate it with caffeine as it has (or can have, depending on dose and method of administration) both stimulating and relaxing properties. The fact that nicotine isn't like other stimulants becomes obvious once you consider some of the more stereotypical behaviors of cigarette smokers (smoking to calm their nerves, smoking after sex to relax, etc).

 

More here:

 

http://nicotineland.com/blog/nicotine-a-stimulant-or-a-relaxant-and-how-to-use-it/

[cameronfen]

Do you have any studies that show real health problems with vaping? Right now from all i know is that it is not more dangerous than drinking coffee, coke or alcohol. Nicotine is just a stimulant like caffeine/sugar, so that is not the root of any problems, as long as you don`t use it excessivly.

If it helps you gain some confidence read https://lt3000.blogspot.com/2019/01/the-art-of-worldly-wisdom-smoking-and.html . I think that is a really good article over investing in tobacco.

 

When I looked into this several months ago I couldn't find any solid evidence that vaping is harmful to healthy adults. It's well known that nicotine itself is fairly innocuous, other substances in cigarettes are the causes of the negative health effects.

 

While I believe nicotine is technically a stimulant, it's wrong to equate it with caffeine as it has (or can have, depending on dose and method of administration) both stimulating and relaxing properties. The fact that nicotine isn't like other stimulants becomes obvious once you consider some of the more stereotypical behaviors of cigarette smokers (smoking to calm their nerves, smoking after sex to relax, etc).

 

More here:

 

http://nicotineland.com/blog/nicotine-a-stimulant-or-a-relaxant-and-how-to-use-it/

 

I feel like the reason you can't find anything wrong with vaping is because people only have been using it for 2 or 3 years.  The effect of cigarettes on the lungs doesn't manifest for 20+ years.  There are some preliminary studies that point both ways, but no one can say for sure whether it is healthier than cigarettes or worse. 

[DooDiligence]

Do you have any studies that show real health problems with vaping? Right now from all i know is that it is not more dangerous than drinking coffee, coke or alcohol. Nicotine is just a stimulant like caffeine/sugar, so that is not the root of any problems, as long as you don`t use it excessivly.

If it helps you gain some confidence read https://lt3000.blogspot.com/2019/01/the-art-of-worldly-wisdom-smoking-and.html . I think that is a really good article over investing in tobacco.

 

No I don't have any studies and that's why I said,

 

 

I'll remain long because I hate to take a loss & I'm simply hoping that 1 of 2 scenarios will pan out (is this what thesis drift means?)

 

1. The company will post mediocre returns over the next 5 years & I'll at least break even.

 

2. I'm wrong and they'll avoid civil litigation over vaping or it won't hit them for another 10 years after studies on health risks are concluded & maybe MJ will get removed from schedule 1 status & the industry roll up will get executed.

 

 

Thanks for the link, I'll read it now.

[DooDiligence]

Do you have any studies that show real health problems with vaping? Right now from all i know is that it is not more dangerous than drinking coffee, coke or alcohol. Nicotine is just a stimulant like caffeine/sugar, so that is not the root of any problems, as long as you don`t use it excessivly.

If it helps you gain some confidence read https://lt3000.blogspot.com/2019/01/the-art-of-worldly-wisdom-smoking-and.html . I think that is a really good article over investing in tobacco.

 

When I looked into this several months ago I couldn't find any solid evidence that vaping is harmful to healthy adults. It's well known that nicotine itself is fairly innocuous, other substances in cigarettes are the causes of the negative health effects.

 

While I believe nicotine is technically a stimulant, it's wrong to equate it with caffeine as it has (or can have, depending on dose and method of administration) both stimulating and relaxing properties. The fact that nicotine isn't like other stimulants becomes obvious once you consider some of the more stereotypical behaviors of cigarette smokers (smoking to calm their nerves, smoking after sex to relax, etc).

 

More here:

 

http://nicotineland.com/blog/nicotine-a-stimulant-or-a-relaxant-and-how-to-use-it/

 

I've quit smoking cigarettes twice.

 

I smoked when I was younger & quit cold turkey and it was extremely difficult.

 

A decade or so later, I started back again (I was working in the Gulf of Suez & was frequently spending my time off in Amsterdam.) Schipol was the hub for all of my flights to & from work & I totally blame my re-introduction to cigarettes on the Dutch  ;) (Marok & Styvessant)

 

When I started smoking the 2nd time, I would only smoke a cig or 2 every now & then (socially) & this went on for around 2 decades,

 

Then I started smoking more & more & it just got stupid so I went cold turkey again last November (I chain smoked 3 packs of cigs the day before my hernia surgery) & haven't touched them since, although I have occasionally wanted one when socializing, particularly at a nightclub.

 

This last time quitting was a lot easier, and I did not constantly dream about cigarettes.

 

None of the students in the music program at PSC smokes, but a large % vape.

 

I enjoy a cup of coffee nearly every morning but don't drink it through the day.

I believe coffee & cigarettes exist in 2 separate universes, even though the 2 do frequently collide.

[Foreign Tuffett]

Do you have any studies that show real health problems with vaping? Right now from all i know is that it is not more dangerous than drinking coffee, coke or alcohol. Nicotine is just a stimulant like caffeine/sugar, so that is not the root of any problems, as long as you don`t use it excessivly.

If it helps you gain some confidence read https://lt3000.blogspot.com/2019/01/the-art-of-worldly-wisdom-smoking-and.html . I think that is a really good article over investing in tobacco.

 

When I looked into this several months ago I couldn't find any solid evidence that vaping is harmful to healthy adults. It's well known that nicotine itself is fairly innocuous, other substances in cigarettes are the causes of the negative health effects.

 

While I believe nicotine is technically a stimulant, it's wrong to equate it with caffeine as it has (or can have, depending on dose and method of administration) both stimulating and relaxing properties. The fact that nicotine isn't like other stimulants becomes obvious once you consider some of the more stereotypical behaviors of cigarette smokers (smoking to calm their nerves, smoking after sex to relax, etc).

 

More here:

 

http://nicotineland.com/blog/nicotine-a-stimulant-or-a-relaxant-and-how-to-use-it/

 

I feel like the reason you can't find anything wrong with vaping is because people only have been using it for 2 or 3 years.  The effect of cigarettes on the lungs doesn't manifest for 20+ years.  There are some preliminary studies that point both ways, but no one can say for sure whether it is healthier than cigarettes or worse.

 

Vaping is almost certainly healthier than smoking cigarettes. While you're right that "no one can say for sure", I think that has more to do with how the scientific method works (Popperian falsifiability) than the reality of the evidence.

 

I've yet to see ANY actual evidence that vaping is more dangerous than smoking, so links to these "preliminary studies" would be much appreciated. 

 

 

[cameronfen]

Do you have any studies that show real health problems with vaping? Right now from all i know is that it is not more dangerous than drinking coffee, coke or alcohol. Nicotine is just a stimulant like caffeine/sugar, so that is not the root of any problems, as long as you don`t use it excessivly.

If it helps you gain some confidence read https://lt3000.blogspot.com/2019/01/the-art-of-worldly-wisdom-smoking-and.html . I think that is a really good article over investing in tobacco.

 

When I looked into this several months ago I couldn't find any solid evidence that vaping is harmful to healthy adults. It's well known that nicotine itself is fairly innocuous, other substances in cigarettes are the causes of the negative health effects.

 

While I believe nicotine is technically a stimulant, it's wrong to equate it with caffeine as it has (or can have, depending on dose and method of administration) both stimulating and relaxing properties. The fact that nicotine isn't like other stimulants becomes obvious once you consider some of the more stereotypical behaviors of cigarette smokers (smoking to calm their nerves, smoking after sex to relax, etc).

 

More here:

 

http://nicotineland.com/blog/nicotine-a-stimulant-or-a-relaxant-and-how-to-use-it/

 

I feel like the reason you can't find anything wrong with vaping is because people only have been using it for 2 or 3 years.  The effect of cigarettes on the lungs doesn't manifest for 20+ years.  There are some preliminary studies that point both ways, but no one can say for sure whether it is healthier than cigarettes or worse.

 

Vaping is almost certainly healthier than smoking cigarettes. While you're right that "no one can say for sure", I think that has more to do with how the scientific method works (Popperian falsifiability) than the reality of the evidence.

 

I've yet to see ANY actual evidence that vaping is more dangerous than smoking, so links to these "preliminary studies" would be much appreciated. 

 

 

 

 

Not trying to be chippy, but just google the, albeit loaded phrase, "vaping more dangerous than smoking".  While I would agree that the consensus is "we dont know the effects of vaping, it's likely bad for you, although likely not as bad as cigerettes."  I found a study cited in the NY Post among other sites: https://www.physiology.org/doi/full/10.1152/ajplung.00389.2017 .  The article makes it very clear that the effects from vaping and cigarettes are different.  For some effects on the lung vaping was worse and some cigarettes were.  You can also find more studies and statements pointing both ways (although admittedly the ones pointing against e-cigs more often say it is just as bad) on wikipedia: https://en.m.wikipedia.org/wiki/Safety_of_electronic_cigarettes . 

 

You can look at this article by the national center for health research: http://www.center4research.org/vaping-safer-smoking-cigarettes-2/ and the research papers it points to.  Despite many similarities, The main point is the effect of vaping is different than the effect on cigarettes.  Everyone basically agrees on that.  We just dont know how bad the stuff vaping causes is. 

[DooDiligence]

Do you have any studies that show real health problems with vaping? Right now from all i know is that it is not more dangerous than drinking coffee, coke or alcohol. Nicotine is just a stimulant like caffeine/sugar, so that is not the root of any problems, as long as you don`t use it excessivly.

If it helps you gain some confidence read https://lt3000.blogspot.com/2019/01/the-art-of-worldly-wisdom-smoking-and.html . I think that is a really good article over investing in tobacco.

 

The author is trying hard to keep me calm & I now have the urge to smoke a cigarette  :o

 

---

 

Quick question,

 

I was mainly attracted to Altria's fantastic FCF.

Will the investments in Juul & Chronos cause significant increases in CAPEX relative to operating earnings?

 

---

 

The author also mentioned,

 

"Nicotine use is also proven to be associated with lower incidences of neuro-degenerative diseases such as Alzheimer's and Parkinson's disease"

 

If true, Altria should move on this.

 

---

 

Everyone knows by now that I hold the possibly insane view that Altria is screwing up here so I'll let it rest.

 

I'm still concerned & will not allow my thesis to drift by looking for confirmation from bullish write-ups, but I thank you for the link & the sentiment Frommi :)

 

It's very possible that if I diligently look for downside in all equity investments, I'd never buy anything or I'd have a 4 position portfolio like Munger (or trade out of liquid assets & go all in on real estate.)

[Foreign Tuffett]

Do you have any studies that show real health problems with vaping? Right now from all i know is that it is not more dangerous than drinking coffee, coke or alcohol. Nicotine is just a stimulant like caffeine/sugar, so that is not the root of any problems, as long as you don`t use it excessivly.

If it helps you gain some confidence read https://lt3000.blogspot.com/2019/01/the-art-of-worldly-wisdom-smoking-and.html . I think that is a really good article over investing in tobacco.

 

When I looked into this several months ago I couldn't find any solid evidence that vaping is harmful to healthy adults. It's well known that nicotine itself is fairly innocuous, other substances in cigarettes are the causes of the negative health effects.

 

While I believe nicotine is technically a stimulant, it's wrong to equate it with caffeine as it has (or can have, depending on dose and method of administration) both stimulating and relaxing properties. The fact that nicotine isn't like other stimulants becomes obvious once you consider some of the more stereotypical behaviors of cigarette smokers (smoking to calm their nerves, smoking after sex to relax, etc).

 

More here:

 

http://nicotineland.com/blog/nicotine-a-stimulant-or-a-relaxant-and-how-to-use-it/

 

I feel like the reason you can't find anything wrong with vaping is because people only have been using it for 2 or 3 years.  The effect of cigarettes on the lungs doesn't manifest for 20+ years.  There are some preliminary studies that point both ways, but no one can say for sure whether it is healthier than cigarettes or worse.

 

Vaping is almost certainly healthier than smoking cigarettes. While you're right that "no one can say for sure", I think that has more to do with how the scientific method works (Popperian falsifiability) than the reality of the evidence.

 

I've yet to see ANY actual evidence that vaping is more dangerous than smoking, so links to these "preliminary studies" would be much appreciated. 

 

 

 

 

Not trying to be chippy, but just google the, albeit loaded phrase, "vaping more dangerous than smoking".  While I would agree that the consensus is "we dont know the effects of vaping, it's likely bad for you, although likely not as bad as cigerettes."  I found a study cited in the NY Post among other sites: https://www.physiology.org/doi/full/10.1152/ajplung.00389.2017 .  The article makes it very clear that the effects from vaping and cigarettes are different.  For some effects on the lung vaping was worse and some cigarettes were.  You can also find more studies and statements pointing both ways (although admittedly the ones pointing against e-cigs more often say it is just as bad) on wikipedia: https://en.m.wikipedia.org/wiki/Safety_of_electronic_cigarettes . 

 

You can look at this article by the national center for health research: http://www.center4research.org/vaping-safer-smoking-cigarettes-2/ and the research papers it points to.  Despite many similarities, The main point is the effect of vaping is different than the effect on cigarettes.  Everyone basically agrees on that.  We just dont know how bad the stuff vaping causes is.

 

[Puts on white lab coat and picks up a beaker] I don't find the links very convincing.

 

The results of studies done on mice routinely fail to be applicable to human biology. Also, the same research team did an earlier mice study that found that vaping triggered "milder inflammatory responses and respiratory perturbations" when compared to traditional cigarettes. 

 

https://erj.ersjournals.com/content/46/suppl_59/OA279

 

 

Vaping is now widespread enough that we'll know with a fair degree of confidence relatively soon. We can revisit this in ten years or so. For now I am happy to agree to disagree.

 

 

 

[thowed]

All I want to say about this is that it's hard to say at the moment which of the vaping research is correct, but I suppose one should try and look behind at the incentives i.e. if any interested parties are funding any of it.

 

Historically companies associates with controversial products have been good at getting research commissioned that say that everything is OK.

 

I don't see vaping going away.  Every generation wants to define itself against the one that went before, and vaping is a perfect way of rebelling against your elders, who don't really get it.

 

 

[LounginMKL]

 

Quick question,

 

I was mainly attracted to Altria's fantastic FCF.

Will the investments in Juul & Chronos cause significant increases in CAPEX relative to operating earnings?

 

 

MO funded the JUUL + Chronos with debt (currently revolver, but will get refi to LT debt). No CapEx, just equity.

[cameronfen]

Do you have any studies that show real health problems with vaping? Right now from all i know is that it is not more dangerous than drinking coffee, coke or alcohol. Nicotine is just a stimulant like caffeine/sugar, so that is not the root of any problems, as long as you don`t use it excessivly.

If it helps you gain some confidence read https://lt3000.blogspot.com/2019/01/the-art-of-worldly-wisdom-smoking-and.html . I think that is a really good article over investing in tobacco.

 

When I looked into this several months ago I couldn't find any solid evidence that vaping is harmful to healthy adults. It's well known that nicotine itself is fairly innocuous, other substances in cigarettes are the causes of the negative health effects.

 

While I believe nicotine is technically a stimulant, it's wrong to equate it with caffeine as it has (or can have, depending on dose and method of administration) both stimulating and relaxing properties. The fact that nicotine isn't like other stimulants becomes obvious once you consider some of the more stereotypical behaviors of cigarette smokers (smoking to calm their nerves, smoking after sex to relax, etc).

 

More here:

 

http://nicotineland.com/blog/nicotine-a-stimulant-or-a-relaxant-and-how-to-use-it/

 

I feel like the reason you can't find anything wrong with vaping is because people only have been using it for 2 or 3 years.  The effect of cigarettes on the lungs doesn't manifest for 20+ years.  There are some preliminary studies that point both ways, but no one can say for sure whether it is healthier than cigarettes or worse.

 

Vaping is almost certainly healthier than smoking cigarettes. While you're right that "no one can say for sure", I think that has more to do with how the scientific method works (Popperian falsifiability) than the reality of the evidence.

 

I've yet to see ANY actual evidence that vaping is more dangerous than smoking, so links to these "preliminary studies" would be much appreciated. 

 

 

 

 

Not trying to be chippy, but just google the, albeit loaded phrase, "vaping more dangerous than smoking".  While I would agree that the consensus is "we dont know the effects of vaping, it's likely bad for you, although likely not as bad as cigerettes."  I found a study cited in the NY Post among other sites: https://www.physiology.org/doi/full/10.1152/ajplung.00389.2017 .  The article makes it very clear that the effects from vaping and cigarettes are different.  For some effects on the lung vaping was worse and some cigarettes were.  You can also find more studies and statements pointing both ways (although admittedly the ones pointing against e-cigs more often say it is just as bad) on wikipedia: https://en.m.wikipedia.org/wiki/Safety_of_electronic_cigarettes . 

 

You can look at this article by the national center for health research: http://www.center4research.org/vaping-safer-smoking-cigarettes-2/ and the research papers it points to.  Despite many similarities, The main point is the effect of vaping is different than the effect on cigarettes.  Everyone basically agrees on that.  We just dont know how bad the stuff vaping causes is.

 

[Puts on white lab coat and picks up a beaker] I don't find the links very convincing.

 

The results of studies done on mice routinely fail to be applicable to human biology. Also, the same research team did an earlier mice study that found that vaping triggered "milder inflammatory responses and respiratory perturbations" when compared to traditional cigarettes. 

 

https://erj.ersjournals.com/content/46/suppl_59/OA279

 

 

Vaping is now widespread enough that we'll know with a fair degree of confidence relatively soon. We can revisit this in ten years or so. For now I am happy to agree to disagree.

Sure.  I'm not long or short so admittedly my contribution is just random stuff I've seen online.  I do think though it will take a while to figure it out. 

[DooDiligence]

 

Quick question,

 

I was mainly attracted to Altria's fantastic FCF.

Will the investments in Juul & Chronos cause significant increases in CAPEX relative to operating earnings?

 

 

MO funded the JUUL + Chronos with debt (currently revolver, but will get refi to LT debt). No CapEx, just equity.

 

Thanks.

[LC]

Vaping products use propylene glycol or vegetable glycerin as the delivery system for associated contents (nicotine, flavorings)

 

Here is some analysis of the heating of propylene glycol:

https://chemistry.stackexchange.com/questions/14771/how-does-propylene-glycol-glycerin-form-formaldehyde-acetaldehyde-when-vaporized

 

The flavors may also be harmful when heated and inhaled.

 

Personally, I would rather smoke a cigarette than a vape-pen. The risks are known.

 

I am invested here because I think the valuation is attractive if we focus solely on running off the cigarette portfolio to adults. They need to get out of this nonsense that vaping is "healthier"

[Foreign Tuffett]

 

I'm not trying to be pedantic with all of this. My overall point is that the structure of the US cigarette industry is changing surprisingly quickly from a two company oligopoly to a vaping free-for-all. The profit pool for the latter is likely to be much smaller than the profit pool for the former.

 

Thats the consensus view right now, the problem is it is wrong and that are the situations where you can make a lot of money. Look at the data, smoking decline rates have not changed the past years. Vaping is a new market and it doesn`t subtract from the cigarette market, it attracts more non-smokers than smokers. iQoS might attract more "normal" smokers, because it is more tobacco like. At least thats my view right now and i think i read that MO and BTI management is saying something similar. And it looks like margins for ecigs are even higher than for cigarettes, because it costs the same, but there are no taxes on it in a lot of countries (HEETS for example in germany are 5€ per pack, i bet that PM makes much more on them than on a regular pack of cigarettes).

And people just don`t change their ecig habits that easily, when you buy a device you stay with it (1% of iQoS users have switched to other ecigs when i recall that correctly). The companies make the money with the refills, like Nestle makes money with capsules and not with the nespresso machine (Or the printer manufacturers make their money with the cartridges.). Thats still a great business.

 

This quote is from a Seeking Alpha article: (https://seekingalpha.com/article/4222462-concerned-proposed-menthol-ban)

Therefore, the logical outcome is that the vast majority of menthol smokers will simply switch to non-menthol cigarettes, a view confirmed by people I know who have smoked menthol cigarettes in the past.

 

But i may be wrong on all of this, so take it with a grain of salt.

 

Analyst report quote: "[North American] cigarette vols contracted at a 2.9% annual rate over the 2012-17 period, including a -3.3% dip in Canadian vols and a -2.9% drop in US volumes."

 

Pretty clear MO's cig volumes are going to be down by more than -2.9% this year. Looking at the historical data can be misleading, since Juul (and vaping as a whole) is so new + growing rapidly.

 

I am probably going to take a break from posting in this thread for awhile. Carry on!

 

Just to follow up on the above: US industry cig volumes were down by -4.5% in 2018. 2019 decline is predicted to be -3.5 to -5%. Altria projects -4 to -5% volumes per year over the 2019 to 2023 time period.

 

All #s from Altria's Q4 CC.

[frommi]

Just to follow up on the above: US industry cig volumes were down by -4.5% in 2018. 2019 decline is predicted to be -3.5 to -5%. Altria projects -4 to -5% volumes per year over the 2019 to 2023 time period.

 

All #s from Altria's Q4 CC.

 

Yes, i think we can agree that we both were right to some extend. Vaping subtracted -0.4% from cigarettes, but also attracted 0.8% non-smokers into the nicotine world. To complete your post:

Decline rates:

2013: -4%

2014: -3.5%

2015: -0.5% <-- argumentation is that low gas prices contributed to this, look at gas prices in 2019!

2016: -2.5%

2017: -4%

2018: -4.5% <-- 0.5% volume decline to vaping, so nothing unusual, if you include 0.8% that goes to vaping, MO`s real volume decline is lower and in-line with the past.

2019: -3.5% -> -5% estimation.

 

So overall i am not really worried about volume declines anymore and think that 2019 can surprise to the upside like in 2015, because gas prices are way down from 2018.

In the conference call they mentioned that they include JUUL`s operating profit as soon as they get antitrust approval and expect it in late 2019. So they should easily be able to grow faster again in 2020 on that metric.

[Foreign Tuffett]

Just to follow up on the above: US industry cig volumes were down by -4.5% in 2018. 2019 decline is predicted to be -3.5 to -5%. Altria projects -4 to -5% volumes per year over the 2019 to 2023 time period.

 

All #s from Altria's Q4 CC.

 

Yes, i think we can agree that we both were right to some extend. Vaping subtracted -0.4% from cigarettes, but also attracted 0.8% non-smokers into the nicotine world. To complete your post:

Decline rates:

2013: -4%

2014: -3.5%

2015: -0.5% <-- argumentation is that low gas prices contributed to this, look at gas prices in 2019!

2016: -2.5%

2017: -4%

2018: -4.5% <-- 0.5% volume decline to vaping, so nothing unusual, if you include 0.8% that goes to vaping, MO`s real volume decline is lower and in-line with the past.

2019: -3.5% -> -5% estimation.

 

So overall i am not really worried about volume declines anymore and think that 2019 can surprise to the upside like in 2015, because gas prices are way down from 2018.

In the conference call they mentioned that they include JUUL`s operating profit as soon as they get antitrust approval and expect it in late 2019. So they should easily be able to grow faster again in 2020 on that metric.

 

No, I think you were just wrong. Feel free to disagree if you'd like, but I think this is clear enough that it's not worthwhile to argue about it at length.

[frommi]

No, I think you were just wrong. Feel free to disagree if you'd like, but I think this is clear enough that it's not worthwhile to argue about it at length.

 

Haha, that is funny! Regardless, i wish you a great time.  ;D