Monster Beverage Corp (MNST), Altria Group Inc (MO): The Tobacco Industry Redux?

Lorillard Inc. (NYSE:LO)’s top brand is Newport, which is also the second-best selling cigarette brand in the U.S., which also happens to be a menthol brand — hence the reason the FDA menthol-ban scare is making Lorillard a great buying opportunity. Lorillard owns upwards of 14% of the U.S. market, third behind Altria Group Inc (NYSE:MO) and Reynolds American, Inc. (NYSE:RAI). Newport made up nearly 88% of Lorillard’s total volume as of 2012.

Bottom line

The three major U.S. tobacco companies have outperformed the S&P 500 impressively over the past decade…

And even with the likes of various lawsuits and allegations directed at the energy drink market, Monster Beverage Corp (NASDAQ:MNST) is proving to be just as resilient, with a recent pullback due to overhang, but again, I think the pressure in the stock is overdone…

Analysts put the long-term (five-year) annualized EPS growth rate for the company at 18%. And the stock trades at 25 times forward earnings, with no perfect competitors in the public markets. I like Monster for the long term, and while we’re at it, it might be worth adding Lorillard Inc. (NYSE:LO) given its 5% dividend yield and cheap valuation compared to Altria Group Inc (NYSE:MO).

Marshall Hargrave has no position in any stocks mentioned. The Motley Fool recommends Monster Beverage. The Motley Fool owns shares of Monster Beverage.

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