Increasing regulation is aimed straight at Big Tobacco companies, and not just in the United States. Investors want to be sure they're well aware of the coming changes and threats posed by government involvement in the sector.
Australia's government recently introduced a bill into its Parliament that would prevent tobacco companies such as Philip Morris International
Philip Morris and British American Tobacco have promised a big fight and are arguing that the move diminishes the value of their trademarks.
Similar rules are going into effect in the United States, a move that could hurt Altria
With a population of around 23 million and a smoking rate of just 17%, Australia is probably more dangerous for Big Tobacco as a model of how anti-smoking policy could work effectively in other larger markets. In contrast, the U.S. has a population of about 310 million and a smoking rate of around 20%, where it has remained for some years.
With regulatory pressure threatening their business, the industry has increasingly moved into oral smokeless tobacco as an alternative and more socially acceptable form of tobacco use, especially as workplace rules against smoking continue to proliferate. However, those smoking alternatives comprise a small percentage of the biggest names' revenue.
Some of the largest players have even moved into smoking-cessation aids, such as with Reynolds' acquisition of Niconovum in 2009. And they could face innovation among smaller players. Upstart Star Scientific
Given these ongoing regulatory developments, investors in tobacco need to keep an eye on these companies. Do you think it's time to buy tobacco stocks? Who's positioned the best?