In case you haven’t heard, the Trump administration is thinking about banning flavored tobacco vapes after more than 500 people fell ill and six died.
Vapes are another word for e-cigarettes. Flavored vapes, with their sweet and fruity flavors, are trendy among teenagers. Customers can get flavors including peppermint, lemon and mango from Juul and other manufacturers.
That’s fine, unless you drop dead from them.
It wasn’t supposed to be this way. A few years ago, the Royal College of Physicians (in Britain) did a study. It found that “e-cigarette aerosol contains far fewer carcinogens than tobacco smoke, and concluded that e-cigarettes ‘impart a lower potential disease burden’ than traditional cigarettes.”
So, according to Royal Freakin’ College of Freakin’ Physicians, e-cigarettes were supposed to be healthier than regular cigarettes, if not exactly healthy.
Sure, sometimes their batteries caught people’s pants on fire. But the worst-case scenario then was some bruised egos and a lot of people watching YouTube videos of those vapes exploding.
But now, the first deaths have been linked to vaping. Industry professionals are pointing the finger at bootleg vape cartridges made by shady companies.
The prime suspect — though not the only suspect — is Vitamin E acetate, which is added to flavored vapes as a cutting agent. It’s not supposed to be inhaled when it’s heated, but makers of illicit vapes don’t care about that.
In any case, the U.S. Food and Drug Administration is finalizing guidance to pull all nontobacco flavors of e-cigarettes from the market within 30 days.
This raises questions for retailers who have vape cartridges on hand. Are the vapes they have on-hand still legal? Is this inventory destined for the dump?
You can see how this might make investors nervous. Especially about tobacco companies that have embraced vaping.
On Friday, Philip Morris International (NYSE: PM) fell 2.5%. British American Tobacco (NYSE: BTI) fell 3.2%. And Altria Group (NYSE: MO) lost as much as 5% in intraday trading and ended with a 3.7% loss.
No surprise on that last one — Altria owns 35% of vape maker Juul. Ouch!
But what if I told you that there’s a tobacco company that’s not hurt by a potential vaping ban?
In fact, this company’s profits might rise.
And I know this company well. It’s in the portfolio of Wealth Megatrends, my monthly newsletter.
That company is Vector Group (NYSE: VGR). And it went UP while its competitors were falling!
I originally recommended the stock because A) cigarettes are nearly recession-proof, and B) Vector’s cigarette business was the only major national brand to see increases in retail shipments last year. It bucked a 5% decline in in the industry.
That’s because the company specializes in discount brands — Eagle 20s, Pyramid, Grand Prix, Eve and Liggett Select. Vector Group has a 13% share of the discount cigarette market.
Importantly, Vector Group has no vapes. Also, it pays a fat stogie of a dividend, currently yielding 11.83%.
Let’s take a look at an updated version of the weekly chart I sent my subscribers in August …
Nice move, eh? It’s still a buy.
Sure, my subscribers bought it cheaper than you. But with this vaping scandal sending the outlook for cigarette makers up in smoke, and a horde of addicted customers looking for something else for their nicotine fix, I think $18.50 could be a bit low on the price target.
This just goes to show that every turn of the news cycle can bring winners and losers. We’re racking up quite a list of them in Wealth Megatrends. Eight positions with open gains, and more to come. And we bank lots of winners, too. Earlier this year we banked 10 winners in a row.
All the best,
P.S. Are you going to the Toronto MoneyShow on Sept 20-21? You can catch my presentation on Cannabis Stock investing. It should be very interesting. See you there!