Lorillard Inc. (LO) and the Electronic Future of Big Tobacco

In other words, they don’t (at least as of now) have the extremely negative public image that real cigarettes do.

Most e-cigs also cost only half as much as their tobacco-filled cousins, which offers another practical incentive for a traditional tobacco smoker to “go electronic”. While sales of electronic cigarettes totaled only about $500 million in 2012, they are estimated to generate over $1 billion this year — and this number could grow as more players enter the market and make the electronic products “more mainstream” by increasing public awareness.

So, how to invest?

Data obtained from Yahoo! Finance on May 7, 2013

Lorillard Inc. (NYSE:LO)’s “cheapness” in comparison to its peers likely has much to do with its current heavy reliance on menthol cigarette products. The company owns the leading menthol brand, Newport. The FDA one day banning menthol tobacco products seems to be weighing on the company’s valuation. While a menthol ban may be only a temporary fear, if it is indeed banned, Lorillard will feel the pain.

If these fears don’t concern you, however, and you are willing to bet on Lorillard Inc. (NYSE:LO), you will be getting nice yield at a relatively fair price — as well as a piece of the current leader in the lucrative electronic cigarette market.

The article Lorillard and the Electronic Future of Big Tobacco originally appeared on Fool.com and is written by Joseph Harry.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.