Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

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.

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

DOWNLOAD FREE REPORT: Warren Buffett's Best Stock Picks

Let Warren Buffett, George Soros, Steve Cohen, and Daniel Loeb WORK FOR YOU.

If you want to beat the low cost index funds by 19 percentage points per year, look no further than our monthly newsletter.In this free report you can find an in-depth analysis of the performance of Warren Buffett's entire historical stock picks. We uncovered Warren Buffett's Best Stock Picks and a way to for Buffett to improve his returns by more than 4 percentage points per year.

Bonus Biotech Stock Pick: You can also find a detailed bonus biotech stock pick that we expect to return more than 50% within 12 months.
Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.