As an investor, it doesn't pay to follow the crowd.

In this series, though, we highlight a possible exception -- the collective wisdom of our CAPS community. Read the next section if you're unfamiliar with our methodology. Skip it if you want to go straight to the results.

Why this crowd is different
Jumping into a stock because your rich neighbor did, or because you heard about it from your friend's uncle who used to work on Wall Street, or because CNBC has been talking about it nonstop is a recipe for disaster.

If there's one thing I've learned as a stock analyst, it's that any stock can be gussied up to sound like a world-beater. If there's a second thing I've learned, it's that being a smart person doesn't make you a good investor.

In the hands of a smart person with good communication skills, the never-were and never-will-be stocks sound like tickets to instant fortune. The ancient Greek philosophers made the distinction between rhetoric and knowledge. The former is convincing; the latter is true.

That's why we factor in track record in our Motley Fool CAPS community. We invite everyone to give stocks an outperform (i.e., a "buy") or underperform rating (i.e., a "sell") in CAPS. We then use those opinions to calculate a rating for each stock -- from one to five stars (five being the best). But -- and this is a big distinction -- we give more weight to the opinions of folks whose picks have performed well in the past.

The top 5 tobacco buys
So, with that methodology as prelude, I present to you the top five stocks that are involved in the tobacco industry based on the number of CAPS members who have rated the stock an outperform. Keep in mind that only four- and five-star stocks rank as collective buys by the community.


Market Capitalization (in billions)

Outperform Picks

CAPS Rating (out of 5)

Altria Group (NYSE: MO)




Philip Morris International (NYSE: PM)




Reynolds American (NYSE: RAI)




Vector Group (NYSE: VGR)




British American Tobacco (AMEX: BTI)




Source: Motley Fool CAPS as of August 12, 2010.

More CAPS members think Altria is a buy than any other tobacco stock. However, its sister company, Philip Morris, is second and is the only one with a five-star rating. Do you think a different stock besides these two Marlboro makers deserves to be the No. 1 buy? Make your thoughts known in CAPS by clicking here. Or just click to do further research on one of these popular stocks.

As for me, I think both Altria and Philip Morris deserve investment consideration. I own both but think that better prices can be had on each. See my write-up of Altria here. See my CAPS profile here.

Anand Chokkavelu owns shares of Altria and Philip Morris. Philip Morris is a Motley Fool Global Gains pick. The Fool owns shares of Altria. The Fool has a disclosure policy.