Ross Healy Lorillard Inc. LO-N COMMENT Jan 09, 2009

LO-N Tobacco. Wonderful yield of about 6.8%. Trading up around 14X Book Value, which as a value investor, he is not comfortable with.

Ross Healy

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$56.210

Stock price when the opinion was issued

tobacco

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COMMENT

Cigarettes. High margins. Make a lot of money, especially during this environment. Doesn't have a problem with this one.

TOP PICK

A $10 billion market cap with a 6% dividend. The kind of company he likes. P/E of 10.93. Debt/EBITDA is 0. (Amanda thinks it's a declining business.)

BUY

Tobacco. This is his favourite. The premier operator and there is better metrics in their product. Expect they will buy back shares. Some overhang in the sector as FDA starts to regulate, so there is some risk.

BUY

Tobacco companies are the best to be in. Their profit margins are high and customers are addicted to them. A buy and hold type of thing. Enormously profitable and dividends go up regularly. Today's weakness could be an analyst downgrading it.

DON'T BUY

Won’t buy into this sector at all. 43 different brands. A company that kills its customers. Makes a lot of money and has a high debt load so he would not like it if it was in a field he liked. They are very diversified. Headline risk.

COMMENT

The new wave is getting into that safer electronic cigarette area and a lot of tobacco companies are trying to move into that space. Likes this for its nice dividend of 4.6%. You are paying a 1.3 estimated peg ratio. Not a really cheap stock but not extremely expensive for a consistent low beta type of stock.

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Ross Healy Lorillard Inc. LO-N COMMENT Jan 09, 2009

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