Five Best Tobacco Stocks to Buy Amid Industry Growth

#2 Altria Group Inc (NYSE:MO)

Investors with Long Positions (as of September 30): 41

Aggregate Value of Investors’ Holdings (as of September 30): $1.63 Billion

The total number of hedge funds having investments in Altria Group Inc (NYSE:MO) slid by two during the third quarter. However, the aggregate value of these holdings appreciated by more than 30%, while the stock gained about 10.4% during this period. Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital raised its stake in Altria Group Inc (NYSE:MO) by 114% in the July-September period to 6.48 million shares.

The company’s stock closed 2015 with an appreciation of around 18% and currently sports a dividend yield of around 3.79%. The shares gained ground on the back of several events, including SABMiller’s acquisition by Anheuser Busch Inbev SA (ADR) (NYSE:BUD) in a $107 billion deal, with Altria holding around 27% of SABMiller.

#1 Philip Morris International Inc. (NYSE:PM)

Investors with Long Positions (as of September 30): 42

Aggregate Value of Investors’ Holdings (as of September 30): $3.13 Billion

Philip Morris International Inc. (NYSE:PM)’s stock gained around 8% during 2015 and, while the number of hedge funds with exposure to Philip Morris increased by one during the third quarter, the aggregate value of their holdings remained almost unchanged. Last year, the company lost a protracted and costly legal battle against Australian laws requiring branding on cigarette packaging to be replaced by graphic health warnings. Philip Morris has also been focusing on the development of its e-cigarette technology, which have been gaining considerable traction. According to Citigroup, e-cigarettes could have a compound annual growth rate of 50% for the next five years and revenues for the industry this year are expected to touch $3.2 billion, a sharp rise from $20 million in 2008. Andy Brown‘s Cedar Rock Capital holds about 12.45 million shares of Philip Morris International Inc. (NYSE:PM).

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