Philip Morris

Philip Morris International Inc. (NYSE:PM) is the world’s largest tobacco company and today the company released plans that detail a plan to sell a new type of cigarette that will have lower health risks by 2017.  The company said that the new, “safer” cigarettes will be featured in the company’s brands such as Marlboro.

Management gave a hint that the latest technology is to heat the tobacco rather than burning it which may have safer qualities than if you simply burned it like a traditional cigarette.

As reported by Thomas Mulier at Bloomberg: “We are on the eve of what we all believe could be a paradigm shift for our industry,”says Chief Executive Officer Louis Camilleri. The new cigarettes have “the very real potential to not only be a game-changer, but also be the key to unlock several hitherto virgin territories, most notably the huge Chinese market.”

Philip Morris is the leader in the tobacco industry and with dividends; this stock has been outperforming the broader market for years.  However, some people refuse to by tobacco stock such as Philip Morris due to the fact that people do and can die from tobacco.

Philip Morris may be the leader in the industry but it still has some growth potential left in certain areas of the world.  Right now, the Chinese tobacco market would be a prime example of a market that American tobacco makers would love to get into.  The Chinese population tends to smoke a lot which creates lots of potentially new customers.  Other Asian countries possess the same characteristics as well which would benefit Philip Morris if they began selling their products in that market.

As of right now, 45% of Philip Morris’s stock price comes from Asian buyers.  Next, it has a 27% exposure to the European Union which could be a bit worrisome due to the terrible conditions in the region right now.  Next on the list, Eastern Europe, Middle East and Africa make up 22.3% of the tobacco maker’s share price.  Lastly, Latin American and Canada make up only 7%.

The bottom line here is that tobacco stocks tend to be more recession proof as smokers tend to smoke more when they are stressed and current conditions call for higher stress.  Philip Morris is the industry leader for tobacco with a lot of growth potential left in the stock.