PM - Philip Morris International

[ourkid8]

Peach on brother! Just under 20% of my portfolio is in PM and this is an investment I plan to hold on for life.  I truly can understand the moral aspects or not investing in this company but if you are able to pass that, this is a no brainer

 

S

 

When Philip Morris International separated from domestic Philip Morris in 2008, the market cap was $100 Billion.

 

 

Since then, PM has returned $50 billion to shareholders via dividends and share repurchases. They have 22% fewer shares outstanding and they have grown the dividend 85%.

 

For being such an incredible money machine, PM doesn't get enough credit, and to be completely honest, if I were forced to put 100% of my net worth in only one stock, this is it, without any hesitation.

[FCharlie]

I truly can understand the moral aspects or not investing in this company but if you are able to pass that, this is a no brainer

 

S

 

 

The people who make the moral argument aren't thinking clearly. Somehow they feel that by not owning the shares of the shares of a tobacco company that they will somehow prevent smoking related deaths, or they won't have the guilt associated with making a profit on people dying.

 

If you go to or listen to the annual shareholders meeting, you're lucky if one out of five questions from the audience has anything to do with the company. Most people go there with the goal of making a statement to Louis Camilleri but the points they make don't make any sense. They somehow think that if Philip Morris shut down operations, people would quit smoking. They somehow think that harming the legitimate industry will reduce smoking. All it does, and there is plenty of evidence to support this, is to increase contraband and illicit trade. The government loses tax revenues, the stores lose sales, the companies lose profits, and the end user ends up with an equally harmful or more harmful product. Period.

 

Once you realize these two things, one, that tobacco needs and a legitimate industry because it's going to exist regardless, and two, that owning or not owning the shares has zero impact on smoking, it's a an obvious choice. Buy the stock. It's the greatest money machine on earth.

 

 

 

 

[RichardGibbons]

 

The people who make the moral argument aren't thinking clearly. Somehow they feel that by not owning the shares of the shares of a tobacco company that they will somehow prevent smoking related deaths, or they won't have the guilt associated with making a profit on people dying.

 

I think maybe you don't understand what a "moral argument" means.  Even if both these things were true, neither would be a moral argument for or against anything, though they make a good straw man if that's what you're looking for.

 

The moral argument is that as a shareholder, you are the owner of a company whose products, when used as intended, kill people.

 

Once you look at it that way, it is as simple as you describe.  Do you think it's fine to be the owner of a company that kills people, or not?  I think not.  You think the money is more important -- because your ownership doesn't make a real difference either way, it's OK to profit from a company that kills people.  That's fine too.  It just means that you follow a different moral code than I do.

[ourkid8]

http://investors.pmi.com/phoenix.zhtml?c=146476&p=irol-newsArticle&ID=1795137&highlight=

 

Philip Morris International Inc. (PMI) Announces Leadership Succession Plan Andre Calantzopoulos Appointed Chief Executive Officer.  Louis Camilleri to Remain Chairman of the Board.

 

A few key points in the announcement: (Absolutely amazing and these results are as of the spin-off on March 28, 2008.)

 

• Total Shareholder Return of 103.5% versus the S&P 500 Index (20.6%);
  
• Returned over $50 billion to shareholders through dividends and share repurchases;
  
• Met, or exceeded, the high end of its adjusted diluted EPS annual growth target of 10-12%, excluding currency, each year;
  
• Increased its dividend each year for a cumulative increase of 84.8%; and
  
• Repurchased 489 million shares, or 23.2% of the shares outstanding after the spin-off, at an average price of $56.96 per share.
  
• Global market share excluding China and the USA is now a record 28.8% in 2012.  This is up .5% over 2011
  

 

 

[FCharlie]

It's sad to see Louis slowly turning over leadership but Andre will be a good CEO. He's been working directly with Louis for years.

 

And yes. The numbers are incredible. They're also incredible if you go back to the days before Louis Camilleri took over from Geoff Bible. I think the today's dividends are roughly 35% of the stock price then and the stock is up over 500%.

 

 

 

 

[kmukul]

I had started watching it, it has a recent pullback with the markets, if it falls more it would be in interesting range again. For the experts how does it compare with the competition like LO and others they have higher dividend yield and lower valuation and have had very comparable grown in past.

 

The following article at seekingalpha has some comparisons

http://seekingalpha.com/article/1513942-philip-morris-a-golden-opportunity?source=yahoo

[ourkid8]

Its hard to compare PM and LO because of their geographies in which they compete.  PM sell globally besides US and China whereas LO, is only in the U.S.  PM split from MO due to the regulatory environment that exists in the U.S. 

 

The kicker to PM is their long term growth profile in Africa, middle east and Asia and their safer cigarette lineup they are planning to introduce in 2017, read about it and let me know what you think? This may allow them entry into the 2 trillion stick market of China!!!!!!!  Read my write-up and you will see how bullish I am on this company long term and ask any questions you may have!

 

Tks,

S

[Philip Morris IV]

Its hard to compare PM and LO because of their geographies in which they compete.  PM sell globally besides US and China whereas LO, is only in the U.S.  PM split from MO due to the regulatory environment that exists in the U.S. 

 

The kicker to PM is their long term growth profile in Africa, middle east and Asia and their safer cigarette lineup they are planning to introduce in 2017, read about it and let me know what you think? This may allow them entry into the 2 trillion stick market of China!!!!!!!  Read my write-up and you will see how bullish I am on this company long term and ask any questions you may have!

 

Right.  I imagine PM's real competitors are British American and Imperial, but BAT still competes in the U.S. via its 40% stake in Reynolds, and Imperial is weighted towards the more mature Europe market.  PM has lasered its sights on emerging markets and will likely capture the most rents from the growth there.

 

Breaking into China will be difficult.  China National being a state-owned monopoly, they really have no incentive to let anyone else in.  However they have begun to grow and sell foreign brands like Marlboro under license, which should give PM some exposure through royalties.

[ourkid8]

BTI and Japan Tobacco are their two major competitors.  PM is definitely laser focused on the emerging markets BUT they are also maximizing their cash flow they receive through the mature markets.  (Their dividend and share repurchase program is VERY generous)  PM is obtaining royalties with CNTC through Marlboro and currently selling about 2 billion sticks a year in China as per the last investor’s conference.  It will take time to fully enter the market and management believes with the soon to be released safer cigarettes it will allow them to enter this very lucrative market.  I can only imagine the type of growth we will see if they are ever able to enter China, it would be unbelievable!!!!

 

On a side note, the Indonesia cigarette market is potentially as big as the United States and growing 7-10% a year and look how profitable Altria is.  This is also another market we should not forget! 

 

Tks,

S

 

Its hard to compare PM and LO because of their geographies in which they compete.  PM sell globally besides US and China whereas LO, is only in the U.S.  PM split from MO due to the regulatory environment that exists in the U.S. 

 

The kicker to PM is their long term growth profile in Africa, middle east and Asia and their safer cigarette lineup they are planning to introduce in 2017, read about it and let me know what you think? This may allow them entry into the 2 trillion stick market of China!!!!!!!  Read my write-up and you will see how bullish I am on this company long term and ask any questions you may have!

 

Right.  I imagine PM's real competitors are British American and Imperial, but BAT still competes in the U.S. via its 40% stake in Reynolds, and Imperial is weighted towards the more mature Europe market.  PM has lasered its sights on emerging markets and will likely capture the most rents from the growth there.

 

Breaking into China will be difficult.  China National being a state-owned monopoly, they really have no incentive to let anyone else in.  However they have begun to grow and sell foreign brands like Marlboro under license, which should give PM some exposure through royalties.

[kmukul]

Thanks a lot guys

[Gamecock-YT]

 

 

On a side note, the Indonesia cigarette market is potentially as big as the United States and growing 7-10% a year and look how profitable Altria is.  This is also another market we should not forget! 

 

Vice on HBO did a segment on 'Indonesia's cigarette obsession'. It's not uncommon for 10 years old to be smoking.

[Phaceliacapital]

Those interested in PMI, did any also look into Swedish Match?

[ourkid8]

In 2009, Philip Morris International formed a joint venture with Swedish Match to commercialize Swedish Snus and other smoke-free tobacco products worldwide, outside of Scandinavia and the United States. While not a part of Philip Morris Sweden, this joint venture is based in Stockholm.

 

PM owns 50% of the joint venture and I prefer to play it with PM.  I personally do not want any US tobacco exposure and prefer the regions outside the United States in this industry.  The lawsuits are brutal in the states...

 

Tks,

S

 

 

Those interested in PMI, did any also look into Swedish Match?

[Phaceliacapital]

From a quick glance, 30% of revenue is from USA. I am not familiar with lawsuits there but will look into it, thanks.

[Palantir]

 

 

On a side note, the Indonesia cigarette market is potentially as big as the United States and growing 7-10% a year and look how profitable Altria is.  This is also another market we should not forget! 

 

Vice on HBO did a segment on 'Indonesia's cigarette obsession'. It's not uncommon for 10 years old to be smoking.

 

Wouldn't it be amusing if PM hedged its bets by selling lung cancer drugs?

[Philip Morris IV]

From a quick glance, 30% of revenue is from USA. I am not familiar with lawsuits there but will look into it, thanks.

 

Are you referring to Swedish Match overall or the joint venture?

 

 

@Palantir, I think they're already hedging their bets in the medical field... with marijuana  ;D

[Phaceliacapital]

Swedish Match overall

[Palantir]

This doesn't really stand out as cheap to me. Assuming:

 

FCF of $8B

Net Cash position of -$21.62B,

Initial 7% growth rate, declining to 3.5% over 20 years,

I get an IV of 80....using long term equity returns of 9%.

 

Granted my model is very simple....but am I using too conservative of a growth projection...?

[Kiltacular]

PhilipMorrisIV,

 

Would you buy PM here?  It is looking good for income oriented portfolios from my perspective -- nearing 52 week low.

 

TIA for any updates that you're aware of.

[Philip Morris IV]

Kiltacular -

 

I don't personally own PM but manage some separate accounts (including family) where it is a staple.  These portfolios are more conventional than us value junkies: near-fully invested, income oriented, reluctant with names they haven't heard of.  I have bought recently in the $87 range for them and will likely buy more as cash or redeployable cash is available.  At these prices it appears cheaper than its competitors and yet is the more powerful player.

 

Despite my username-sake, I'm no authority on PM (or any stock for that matter).  I just have a thing for Big Tobacco because when I started learning about investing, it was easier for me to understand and struck chords on Buffett's concepts of pricing power, wide moat, defensive and concentrated industries, B&H, "the inevitables," etc.

[FCharlie]

Here's the beauty of PM.

 

If you go back in history, study their dividend increases, study the increases at the company pre and post separation from Altria, you see a long history of double digit dividend increases.

 

All you really need to do to come to a target for future price is figure out what level of dividend yield you feel is appropriate, buy at that level, then assume forward returns will be that yield plus the % rate of future dividend increases. In order for the yield to stay constant, the stock must rise in proportion to the dividend increases or the yield gets excessive.

 

Historically, PM is a double digit dividend increase, which typically occurs every Q3. We're about to have one next month. If you feel a 4% yield is appropriate going forward, then you should assume a 14%+ growth going forward from here if you buy at today's prices.

 

It seems so easy and it is. PM should be a core holding for anyone looking for income and growth.

 

 

[Kiltacular]

Thanks Philip Morris IV and FCharlie for updated thoughts.

[LC]

FCharlie, have you been adding some PM at these levels?

[ourkid8]

http://finance.yahoo.com/news/philip-morris-wins-small-victory-051633222.html

 

 

Philip Morris wins small victory in Thailand

 

Philip Morris wins small victory in bid to keep larger warnings off cigarettes in Thailand

[ourkid8]

I know I am not FChalie but I have not added to my account as it is one of my largest positions in my portfolio.  However, I am strongly considering adding to my parents account as they love dividends!  The stock is pretty much flat from last year and have reduced their shares outstanding by about 4% since then.  This goes back to what Buffett wrote about IBM in his annual report.  The longer it stays flat, the more stock they can repurchase thus increasing our percentage in the companies future earnings.

 

I am still sticking to what I wrote earlier in the thread and I am long PM.  This is the type of company you buy and forget about for the next 20-25 years.

 

Thanks,

S

FCharlie, have you been adding some PM at these levels?