However hard the market slams a stock, there's always the chance it'll come bouncing right back. We'll consult our Motley Fool CAPS community to find shares on the rebound, examining one specific sector of the economy in search of companies with rising CAPS ratings.
There are just eight stocks listed under tobacco in the CAPS' screener, but half of them carry well-respected four- and five-star ratings. Those accolades mean our 170,000-member CAPS community is confident that these stocks will beat the market in the months ahead. Let's see what members are saying about the ones below:
(out of 5)
52-Week Price Change
5-Year Growth Rate
|Alliance One International (NYSE: AOI )
|Altria (NYSE: MO )
|Lorillard (NYSE: LO )
Source: Motley Fool CAPS; Yahoo! Finance. NA = not available.
With the S&P 500 up 8% over last year, CAPS tobacco stocks did much better. The average stock is up 36% from the year-ago period. Of course, bolstering those returns were performances like those by Star Scientific (Nasdaq: CIGX ) , the maker of a "healthier" cigarette, which was up more than 150% year over year, and discount smokes maker Vector Group (NYSE: VGR ) , which was up 31% in the same period.
Let's take a closer look at what investors think about the three stocks in our chart.
Some spring in its step
Alliance One International was the only company among the eight to report negative returns over the last year. One of the things roiling Alliance's performance was the accusation that previous company executives had bribed governments in Kyrgyzstan and Thailand to gain contracts in those countries.
Although the description of the deals sound like some bad crime drama -- with bags stuffed with $100 bills supposedly passed off to government agents -- the SEC has cracked down on a number of companies suspected of violating the Foreign Corrupt Practices Act. German carmaker Daimler plead guilty to bribing officials in 22 countries and paid almost $200 million in fines, and Alcatel-Lucent (NYSE: ALU ) paid $137 million. Meanwhile, Merck (NYSE: MRK ) is under investigation by both the Justice Department and the SEC for allegedly violating the act. Alliance One ended up pleading guilty and paid $9.5 million in fines.
Yet CAPS members believe the tobacco grower will be able to smoke the markets going forward, as 94% of those rating Alliance One have indicated a bullish preference. But is it a stock for your portfolio? Add Alliance One International to your My Watchlist page and have all the Foolish news and analysis about this stock aggregated in one place.
Driving a bargain
Altria was the second-best performer behind Star Scientific as it snuffed out doubts about its ability to keep growing in the face of an onslaught of smoking bans. Profits in the most recent quarter rose 28% despite a drop in volumes, as it was able to pass on price increases.
Star's own growth shows that during a recession there's a considerable bias by smokers toward discount brands, but Altria was still able to increase prices across all of its 18 brands and witness its Marlboro brand increase the number of smokers choosing it.
CAPS member 7numismatics7 sees the growth of the nanny state as a passing trend:
This company is a force of nature - the only thing that holds it back is the irrational anti-tobacco lobby. Fascism has a way of not lasting so in time, the cult of public health will fade and MO will rise even higher.
Until then, however, governments will have their say on what cigarette makers can sell. The FDA recently banned "flavored" cigarettes, including clove and chocolate-flavored ones, perhaps believing that if you're going to smoke it must be made to taste like crap. Which is a big concern for Lorillard, the maker of the very popular Newports, since menthol cigarettes are the next target of the anticigarette crusaders.
Still, 95% of the CAPS members rating Lorillard apparently believe cigarettes' addictive qualities will outweigh the nonsensical bans the FDA is proposing, and they correspondingly mark the stock to outperform the broad market averages.
Let us know in the comments section below or on the Lorillard CAPS page whether this argument is just going up in smoke.
The ball's in your court
There are many factors that go into whether a stock is a buy or sell, so it pays to start your own research on these stocks on Motley Fool CAPS. Read a company's financial reports, scrutinize key data and charts, and examine the comments your fellow investors have made, all from a stock's CAPS page. Head over to CAPS today and share your thoughts with other investor analysts on whether you think these stocks are ready to bound higher.