Has Reynolds American, Inc. (RAI) Become the Perfect Stock?

Still, the major problem for Reynolds and its peers remains the combination of negative advertising, regulation, and legal attempts to restrict smoking. Even though Lorillard and Reynolds American managed to avoid the full brunt of FDA labeling regulations that would have required huge graphic warning labels on cigarette packs, it’s clear that the trend is moving toward further pressure.

One interesting though somewhat outlandish growth avenue for Reynolds American and its peers might come if marijuana gets legalized at the federal level. As Fool Million Dollar Portfolio advisor Charly Travers explained earlier this week, Reynolds American and Altria have the infrastructure and distribution network already established to make marijuana production financially viable. The chances aren’t necessarily all that good, but the potential profits make it worth at least thinking about.

For Reynolds to improve, it needs to find new avenues for growth while improving its balance sheet. If it can’t fight back against the anti-smoking tide, it’s hard to see how Reynolds will move toward perfection anytime soon.

The article Has Reynolds American Become the Perfect Stock? originally appeared on Fool.com and is written by Dan Caplinger.

Fool contributor Dan Caplinger has no position in any stocks mentioned, and neither does The Motley Fool.

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