Altria Group Inc

Facebook Inc (FB) and Altria Group, Inc. (MO) – Buy

  

Once again, I added more to my positions today in Facebook Inc (FB) at $132.76 and Altria Group, Inc. (MO) at $48.79.

Facebook is now my 3rd largest holding and Altria is my 9th largest holding. Rankings for top holdings are located here.

FACEBOOK

I’m very bullish on Facebook at these prices. I’ve been waiting a long time for the opportunity to get shares this cheap. Trading at a PEG of only .6 and a forward PE of 18.01! I believe that Facebook is one of the greatest ways to grow a business now. My monthly expenditures on ads on Facebook and Instagram for my own and client’s businesses have continued to grow. Facebook and Google are the best opportunities for lead/sales generation. Increased privacy regulation will only make them stronger as smaller/new entrants will have difficulty keeping up just as tobacco legislation helped Altria remain dominant. I would continue to add to your position if it continues to go down. I’ve bought a few times so far and plan to add more making it one of my largest positions.

ALTRIA

I agree with their strategy to pivot towards cannabis and vaping. I think this is very smart considering declining tobacco-based product sales. Their acquisition interests in JUUL and Cronos help with this concern and get them in to two high growth categories related to their market. Altria can use it’s vast distribution network and experience with government regulation to help expand vaping and cannabis products worldwide.

The increased debt to make the purchases is a bit concerning, but necessary to ensure the future of the company. Assuming they get a rate of around 4% on the loan and the cost reduction plan they mention in this release would cover the majority of the interest and a portion of the principal for JUUL. Cronos is relatively small in comparison.

The dividend yield is also great at 6.16%. I really nice income stock to have in your portfolio during a volatile market.

Valuation

  • PE of 8.7
  • Price/Book of 5.9
  • Dividend yield is 6.16%

Threats

The biggest threats I see to Altria are declining sales of tobacco and increased regulation. There will most likely be more regulation on vaping and as marijuana is legalized it will come come with a heavy load of regulation as well. Also, there is a current proposal to ban methanol. However, concerns over this seem to overblown. Also, Altria is experienced in dealing with government regulation. In fact, I believe government regulation is responsible for their success. The intense regulations of the tobacco industry ensured their dominance for many years and could do the same with vaping and marijuana. I would say that anyone interested in getting exposure to marijuana investing should definitely take a look at Altria to get the exposure with minimal risk.

Here is my previous analysis on all three: