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Top tobacco stocks for 2023 include British American Tobacco PLC, Vector Group Ltd. and RLX Technology Inc., which lead the rivals for best value, fastest growth, and best performance, respectively.
Tobacco stocks as a group can be represented by the AdvisorShares Vice ETF (VICE), an exchange-traded fund, although VICE also owns a variety of other sin stocks in addition to tobacco companies. VICE returned around 1% last year, while the Russell 1000 Index rose 3%.
Below, we look at the top tobacco stocks based on value, growth and performance. Reference figures above are as of May 26, and all data below are as of May 23, 2023.
Best Value Tobacco Stocks
These are the tobacco stocks with the lowest 12-month price-to-earnings (P/E) ratio. Since profits can be returned to shareholders in the form of dividends and buybacks, a low P/E ratio indicates that you are paying less for every dollar of profit generated.
| Best Value Tobacco Stocks | |||
|---|---|---|---|
| Price ($) | Market Cap (Market Cap) ($B) | 12 month price/earnings ratio | |
| British American Tobacco PLC (BTI) | 33.98 | 76.0 | 9.7 |
| Altria Group Inc. (MO) | 44.93 | 80.2 | 14.4 |
| Philip Morris International Inc. (PM) | 92.94 | 144.3 | 16.6 |
Source: YCharts
- British American Tobacco PLC: British American is a British consumer goods company that manufactures and sells tobacco and nicotine products in the form of cigarettes, vapes and oral products such as lozenges. Anglo-American stocks have lost around a quarter of their value over the past year.
- Altria Group Inc. : Altria is a holding company which, through subsidiaries, manufactures and sells cigarettes, cigars, pipe tobacco and related products. It also has a stake in AB InBEV, the world’s largest brewer. Shares of the company have fallen nearly 20% in the past year amid allegations that Juul, the e-cigarette company in which Altria once held a 35% stake, is being marketed to minors. On May 10, Altria agreed to pay $235 million to settle 6,000 federal and state lawsuits related to Juul. The settlement does not resolve the Juul-related antitrust litigation initiated by the Federal Trade Commission in April 2020.
- Philip Morris International Inc.: Philip Morris is a global tobacco company. It offers cigarettes as well as smokeless tobacco products, including non-combustion heat, vapor and oral nicotine products. Philip Morris shares are down about 16% over the past year.
Fastest Growing Tobacco Stocks
These are the top tobacco stocks ranked by a growth model that scores companies based on a 50/50 weighting of their most recent quarterly growth as a percentage of revenue over the year and the most recent quarterly growth of the earnings per share (EPS) for the year.
Sales and profits are critical factors in the success of a business. Therefore, ranking companies on a single measure of growth makes a ranking sensitive to accounting anomalies in that quarter (such as changes in tax laws or restructuring costs) that may make either figure not representative of the company in general. Companies with EPS or revenue growth greater than 1,000% were excluded as outliers.
| Fastest Growing Tobacco Stocks | ||||
|---|---|---|---|---|
| Price ($) | Market capitalization ($B) | EPS growth (%) | Revenue increase (%) | |
| Vector Group Ltd (VGR) | 11.96 | 1.9 | 4.8 | 7.1 |
| Altria Group Inc. (MO) | 44.93 | 80.2 | -7.4 | -1.2 |
| Philip Morris International Inc. (PM) | 92.94 | 144.3 | -14.7 | 3.5 |
Source: YCharts
- Vector Group Ltd: Vector Group is a holding company which, through its subsidiaries, manufactures and markets cigarette products. The company is also involved in real estate projects through one of its subsidiaries. For the first quarter of 2023, Vector reported revenue growth of 7%, driven by an increase in revenue from the tobacco segment.
- Altria Group Inc. : See company description above.
- Philip Morris International Inc.: See company description above.
Tobacco stocks with the best performance
These are the tobacco stocks that have had the highest total return or lowest price decline over the past 12 months.
| Tobacco stocks with the best performance | |||
|---|---|---|---|
| Price ($) | Market capitalization ($B) | Total return over 12 months (%) | |
| RLX Technology Inc. (RLX) | 2.23 | 3.5 | 19.3 |
| Vector Group Ltd (VGR) | 11.96 | 1.9 | 9.3 |
| Philip Morris International Inc. (PM) | 92.94 | 144.3 | -4.7 |
| Russell 1000 Index | N / A | N / A | 3.1 |
| AdvisorShares Vice ETF (VICE) | N / A | N / A | 1.1 |
Source: YCharts
- RLX Technology Inc. : RLX Technology is a Chinese company specializing in e-vapor products and services. The company engages in scientific research, technology and product development, distribution and related services. Shares of RLX soared at the end of 2022, but have recently fallen following disappointing results for the last quarter.
- Vector Group Ltd: See company description above.
- Philip Morris International Inc.: See company description above.
Risks of Tobacco Stocks
There are many significant long-term risks associated with investing in the tobacco industry, according to the CFA Institute, a global nonprofit association of investment professionals that awards the Chartered Financial Analyst® designation. These include:
- Regulatory risk: There are 180 parties to the World Health Organization (WHO) Framework Convention on Tobacco Control (FCTC), the world’s first legally binding health treaty. They are committed to implementing a wide range of tobacco control measures to reduce the number of new smokers and encourage current smokers to quit, in a global effort to end the tobacco epidemic. New regulations aligned with these goals are being applied around the world.
- Litigation risk: There are a growing number of major class actions against the tobacco industry, challenging the assumption that governments will automatically pay for the huge health costs resulting from tobacco.
- Supply chain risk: Some tobacco companies may depend on child labor to manufacture their products, which becomes unacceptable to investors.
- Reputation risk: The tobacco industry is consistently ranked as the least reputable industry in the world. As a result, individual and institutional investors are increasingly avoiding holding these stocks in their portfolios.
Advantages of Tobacco Stocks
Tobacco companies, which sell addictive products, generate predictable cash flows. This can pique investor interest because it means strong dividends that protect against rising inflation.
However, established companies in the sector such as Philip Morris and Altria will need to advance into “less risky” products such as e-cigarettes and vaping to generate real gains. But that’s easier said than done: Altria has backed former e-cigarette star Juul, only to see the startup mired in lawsuits over marketing to minors.
Ultimately, as noted above in the section on risks of tobacco stocks, regulators are likely to decide the fate of the tobacco industry, so future interest in stocks may fade. .
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As of the date of writing this article, the author does not own any of the above shares.