Electronics Cigarettes: What To Watch, What to Ignore

Looking to Invest in E-Cigarettes? Think distribution

Jan 16, 2014 at 10:00AM

The Fool heads out to Vegas to check out the 2014 International Consumer Electronics Show. With more than 3200 exhibitors, including 88% of the top retailers in consumer electronics, the CES is the place to be to see what's coming up in tech.

Think e-cigarettes are hurting big tobacco? True, standard cigarette sales are down, but a lot of tobacco companies are simply acquiring the e-cigarette sellers to make up for the loss.

There were countless trends emerging from CES 2014 this year, but the real question for investors is how to capitalize on these revolutionary opportunities. Fortunately for you, David Gardner has an idea or two on how to invest in these new emerging technologies -- and how you can profit. Get in on the ground floor now by clicking here.

A full transcript follows the video.

Austin Smith: Hey Fools, Austin Smith, here from the floor of CES 2014, here to talk about an interesting trend that we saw in the digital health section of the CES floor, and that was electronic cigarettes.

Very interesting to see this industry, notoriously associated with poor health, making its way very rapidly into better health, using this bridge of electronic cigarettes. Now, investors are very interested in this topic, going forward.

The way that we see it, there's a couple different avenues to look at. There's a lot of companies on the back end, maybe doing the picks and shovels, some of the technology behind e-cigarettes, but many of them are pink sheet stocks, and very, very speculative and risky as a result.

Therefore, looking to the major tobacco companies, there's different ways that this impacts their business. Of course, many people see it as a negative, detracting sales from typical cigarette sales, but the reality is many of these tobacco companies are acquiring a lot of these e-cigarette manufacturers and using it to supplement declining typical tobacco sales.

The good news is, these e-cigarettes typically come with EBITDA margins about twice as high as typical tobacco products, and they operate on very much a razor and blade model.

One of the interesting things to watch are the smaller e-cigarette companies that these major tobacco players are buying. Lorillard (NYSE:LO) recently picked up blu eCigs, and there's Philip Morris (NYSE:PM), Altria (NYSE:MO), Reynolds American (NYSE:RAI); a lot of companies in this space.

This is really going to come down to who has the best distribution first, because most of the products that we're seeing here are virtually identical in function. What's really going to matter is which tobacco companies are picking up which manufacturers and getting those products out there as fast as possible.

Remember, these big tobacco companies are the ones with the distribution relationships in place; Lorillard's acquisition of blu eCigs, maybe about 12-18 months old at this point ... already blu eCigs is the number two seller, by most measures, of electronic cigarettes. Getting out there first, getting your products into these distribution channels, we see being much more important and much more significant than the actual technology in the electronic cigarettes themselves.

Thank you very much for tuning in. For all of your CES coverage, make sure to head over to Fool.com.

Austin Smith owns shares of Philip Morris International. The Motley Fool owns shares of Philip Morris International. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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