Inarguably, one of the biggest controversies on Wall Street is the so-called vaping crisis. Initially billed as safer alternatives to combustible cigarette smoking, vaporizers or e-cigarettes hit a wall earlier this year. As a mysterious wave of illnesses and deaths allegedly linked to vaping emerged, vaping stocks and businesses related to the industry understandably tumbled.
Moreover, the political response has been just as pernicious to vaping stocks. Because many of the impacted are high school students, both state governments and the White House have at least considered banning flavored vaping products. And New York City wasn’t waiting around for federal guidance, recently enacting a citywide flavored vaping product ban.
Naturally, these developments appear to dim the bullish thesis for vaping stocks to buy. However, before ignoring the sector altogether, you may want to consider the contrarian angle. For instance, James Madison University professor Sam Morton notes that tobacco products are proven health risks yet remain legal. Thus, the more important point about vaping and potential regulation is the economic concern, not necessarily the health risks.
Here’s something else: in 2018, the global e-cigarette market reached a value of just over $14 billion. Experts believe that this market will grow to $29.39 billion by 2022. While this forecast was calculated prior to the vaping crisis, it highlights the viability of vaping stocks to buy.
Furthermore, the health crisis itself is flatlining. According to media reports I have collected over the last few months, the growth rate of vaping-related illnesses and deaths have declined substantially compared to the onset of the crisis.
Thus, for the contrarians, this may be an ideal time to consider these seven vaping stocks to buy.
Altria Group (MO)
At the heart of the vaping crisis is Altria Group (NYSE:MO). Famous (and notorious) for its Marlboro brand of cigarettes, Altria saw the writing on the wall. Over the last several years, cigarette smoking in the U.S. has declined precipitously, at least from their perspective. To counter this trend, Altria purchased a 35% stake in popular e-cigarette company Juul.
In theory, this move should have helped MO stock. But this year’s vaping crisis made this a huge mistake, or so it would seem. As vaping illnesses and deaths hurled onto the headlines, angry parents demanded action from their representatives. As you likely know, teenagers unfortunately gained a liking for Juul e-cigarettes.
Still, MO stock has moved significantly higher since early October. Furthermore, I don’t think this is a fluke. Cynically, Altria offers regular cigarettes for vape users who want to switch back. Not only that, the vaping crisis is probably an overblown issue.
I liked MO stock back in late October and I still do. More than likely, the health risks are associated with risky or illegal behaviors, not the practice of vaping.
Philip Morris International (PM)
From a PR perspective, tobacco giant Philip Morris International (NYSE:PM) was lucky not to have a high-profile relationship with an e-cigarette company. Still, that didn’t prevent PM stock from tumbling when the rash of illnesses and deaths started to spike. After all, Philip Morris has also transitioned to vaping products to stay relevant with the adult liberties community.
Still, current owners of PM stock aren’t fussing about their portfolio. That’s because, like Altria and other vaping stocks to buy, PM has also enjoyed a resurgence, starting in late September. In fact, the equity value of Philip Morris is slightly above the price just before the vaping market went awry.
And while prospective buyers have already witnessed a strong leap in the charts, I don’t think PM stock is done. For one thing, the vaping crisis appears mostly to be a U.S.-centric problem. In other countries, vaping products are highly regulated and they may have better control over the black market.
Plus, Philip Morris’ e-vapor products are compelling: these sleek devices are designed to mimic the sensation and flavors of cigarette smoking, appealing to the transitioning market.
British American Tobacco (BTI)
If you want to understand the profitability potential of vaping stocks to buy, just take a look at British American Tobacco (NYSE:BTI). Between Nov. 1 through Dec. 16, BTI stock jumped over 19%. Shares are up about 33% year-to-date. Like other tobacco- and vaping-related organizations, British American Tobacco should still have more upside in 2020 and beyond.
First, the British – bless their hearts – aren’t as fanatical or reactionary to the vaping crisis as we Americans are. At the height of the hysteria, CNN reported that the two nations see vaping very differently. No kidding. The British use evidence to support their claims, while Americans use the stable barometer of human emotions.
Some joking aside, BTI stock has likely performed well due to their underlying country’s reasonable, regulated tobacco/vaping ecosystem. For instance, the U.K. has strict limitations on advertising, which probably translated to their lower youth-vaping incidences.
In other words, British American Tobacco has an opportunity to prove the viable case for vaping stocks without the hysteria. To me, that’s good news for the industry and BTI stock.
Imperial Tobacco Group (IMBBY)
Like the other tobacco and vaping stocks mentioned above, Imperial Tobacco Group (OTCMKTS:IMBBY) has also transitioned to e-cigarettes. This of course reflects changing consumer habits as the modern smoker seeks out healthier alternatives. Unfortunately, the drama of the U.S.-based vaping crisis has recently taken the wind out of the sails of IMBBY stock. Still, I believe we have a speculative opportunity here.
To be frank, I’m not buying the health crisis angle that anti-vaping advocates have pushed in the mainstream media. If that were the case, the entire health system in the U.K. – where IMBBY stock is based – is suspect. Just prior to the supposed vaping-related illnesses and deaths, two hospitals in England allowed vape shops to open on their premises.
Here, we must assume one of two things: either British medical professionals are completely out of their minds or the American public is filled with emotionally-triggered individuals. I’m going to go with the latter.
Further, the British remain steadfast in their regulated support of smoking alternatives. Ultimately, this augurs well for IMBBY stock.
Turning Point Brand (TPB)
Although not a commonly cited name among vaping stocks to buy, Turning Point Brand (NYSE:TPB) offers a balanced approach. Primarily, TPB stock is an investment in traditional tobacco products: we’re talking about premium-grade cigarette and tobacco paper brands, which allow smoking aficionados to custom craft their platform.
Should vaping stocks take a hit from unexpected state or federal bans, TPB stock can act as a hedge. As a side note, that’s one of the ludicrous points about proposed vaping bans: such measures will only create a black market or drive people toward combustible cigarettes. If that does happen, though, Turning Point provides a cynical way to profit off the politics.
However, if government agencies adopt a largely hands-off approach, TPB stock can still benefit. How? Although it’s not their most well-known unit, Turning Point has a third-party vaping distribution business. So, whatever direction this market segment goes, TPB will likely capture some piece of the pie.
Cronos Group (CRON)
When talking about vaping stocks, it’s difficult to ignore Canadian cannabis player Cronos Group (NASDAQ:CRON). In late 2018, Altria agreed to buy a 45% stake in CRON stock for approximately $1.8 billion. At the time, it gave legitimacy to both Cronos and the entire legal marijuana industry. With such big players moving into the space, it seemed almost inevitable that shares will rise.
Unfortunately, the opposite was true. On a YTD basis, CRON stock dropped 32%. And compared to 2019’s high, the market loss was more akin to a deep hemorrhaging. Chiefly, the Street lost confidence in cannabis companies to turn meaningful, consistent profits.
If that wasn’t bad enough, the vaping crisis negatively impacted CRON stock. The Altria deal implied that the two would work synergistically toward compelling products. Naturally, cannabis-based vaping products were on the table. Now, it seems like they’re off.
Let’s get something straight: all cannabis stocks are risky ventures. However, Cronos might have an opportunity for upside considering that Canada has very few vaping-related health incidences. If this positive trend keeps up, it could help lift CRON and other vaping stocks.
Canopy Growth (CGC)
Like Cronos above, Canopy Growth (NYSE:CGC) was obliterated in the markets this year. Since the beginning of January, CGC stock dropped over 22%. However, since the beginning of May, shares have tumbled 59%. There’s no way around it: this was a massacre.
Canopy Growth suffered the same credibility problem as every other segment player. At first, the unprecedented nature of marijuana legalization attracted investors. However, the reality of bringing cannabis-based products to the retail market hit multiple snags. Many problems, though, had nothing to do with Canopy or individual companies but rather, government-level inefficiencies.
Whatever the case, CGC stock suffered. Moreover, Canopy’s launch of their vaping products in their native Canada coincided with the rising vaping crisis.
Still, I’d give CGC stock another look, provided that you can handle the volatility risk. With expectations down in the gutter, any bit of good news can spark a significant rally.
As of this writing, Josh Enomoto did not hold a position in any of the aforementioned securities.