What You Were Selling Last Week: British American Tobacco

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LONDON -- One of Warren Buffett's famous investing sayings is "Be fearful when others are greedy and greedy only when others are fearful"-- in other words, sell when others are buying and buy when they're selling.

But we might expect Foolish investors to know that, and looking at what Fools have been selling recently might well provide us with an indication of investments that may be past their prime.

So, in this series of articles, we're going to look at what customers of The Motley Fool ShareDealing Service have been selling in the past week or so and what might have made them decide to do so.

Up in smoke
British American Tobacco (LSE: BATS  ) (NYSEMKT: BTI  ) has been a long-term FTSE 100 success story. Over the past decade, it's delivered a 460% rise in share price, which equates to a market-thrashing 21% annualized return (the average is 9%).

The secret to its success, of course, has been selling a highly addictive product. Unfortunately, the product also causes cancer and all too often kills the customer. There is now an established trend of increasing resistance to tobacco products, both from consumers, who wish to give up for the sake of their health and their wallets, and from governments, which feel they have a duty to protect their citizens and have imposed ever-tighter restrictions on the advertising, sale, and consumption of cigarettes and related items.

As a result, tobacco companies are finding it ever more difficult to sell their products. In its latest annual report for the year to the end of 2012, British American Tobacco revealed that overall cigarette volumes were down 1.6%, mainly due to "contractions" in some of the company's larger markets. It's that sort of thing that may have led some investors to decide that British American Tobacco's best days as an investment could well have gone up in smoke, and which put the company in the number 10 spot in the latest "Top Ten Sells" list*.

True, it's not quite all doom-and-gloom. An interim management statement for first-quarter 2013, issued in April, announced that there had been some sales volume growth in some markets, such as Bangladesh, Pakistan, and Vietnam. But that was more than offset by much lower volumes in Brazil, and market declines in southern Europe, Eastern Europe, and the Middle East.

British American Tobacco isn't going to become a dreadful investment overnight, of course. And it's developing a portfolio of "next-generation products," including electronic nicotine delivery products -- so-called e-cigarettes -- which should help to at least partly offset what seems to be inevitable further decline in the conventional cigarette market.

But with its core revenues under increasing threat, some investors may be concluding that the only way for British American Tobacco is down, and they will be looking for a better long-term home for their money.

Top-quality share selections
If you were a seller of British American Tobacco, or you're just looking for some quality companies for the long term, you should definitely check out the latest free Motley Fool report, "5 Shares to Retire On."

This report features five top-quality shares -- companies that have an outstanding record of providing reliable shareholder returns -- selected by our team of expert analysts here at The Motley Fool. Get hold of your free copy now.


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