Philip Morris International
Stake: $28.6 million
52-Week Returns: 9%
PM has enjoyed a market-beating 10% climb year-to-date and got a boost recently after reporting profits that grew thanks to higher sales volumes in its largest market of Asia and in Eastern Europe, Middle East and Africa.
While there are obvious concerns for cigarette manufacturers in the face of health risks and increasing regulations — such as Russia’s ban of public smoking, which in turn forced PM to offer higher rates on a recent bond sale — revenue has continued to climb in recent years, in part thanks to the company’s growing emerging market exposure. Of course, a global presence can cut both ways, especially as the U.S. dollar continues to rise.
Also, like most tobacco companies, Philip Morris’ yield is tempting (at 3.7%), and the company has consistently raised its dividend since the spinoff.
However, while tobacco companies traditionally have sported lower valuations, they are hardly cheap at current prices. PM trades for 14 times forward earnings — that’s not only more expensive than the average S&P 500 stock, but more than Philip Morris’ sectormates.