PM - Philip Morris International - Cigarettes In Times Of Crisis

Current Price: 113,83$
Open: 114$
Target: 140$
Stop Loss: 0,45$
Take Profit: 352,46$
S/L and T/P are set basically to avoid machine based trading!
Leverage: X1
Capital Investment: 17,42% of Etoro capital or 0,8% of total capital
Dividend: 4,28$ per year (3,73% dividend yield)

Philip Morris Is A Safe Investment For The Next Crisis

As I think that the next financial crisis will come (we are jumping from crisis to crisis) I searched for a safe value Investment of companies which were not affected largely by the financial crisis. I found Philip Morris and analysed the chart of this Company.

On 22nd of August 2008 Philip Morris peaked at 55,57$. On 6th of March 2009 Philip Morris had a low of 33,34$. That is 60% of its value in 2008 or a decline of 40% and the company share prices quickly recovered after that decline in the following years. At the same time the S & P 500 peaked on 12th of October 2007 at 1561,80$ and had a low on 6th of March 2009 at 683,38$ to about 43,7% of its value in 2007. That is a decline of about 56%. If you look at the the Dow Jones Industrial index for the same period it was at a Peak value of 14093,08$ on 12th of October 2007 and at a low of 6626,94$ on 6th of March 2009 at 6626,94$ which is 47% of its value in 2007 or a decline of about 53%. From these numbers you can clearly see that Philip Morris is a safe and sound investment for the long run if you do not use leverage on this stock. In addition you can cover the inflation rate with a yearly dividend yield of 3,73% for your invested capital. Etoro pays you the dividend for your CFD Investments although you do not directly own the stock.

You can find the earnings forecast at: http://www.nasdaq.com/symbol/pm/earnings-forecast

Missed EPS expectations On 19th of October 2017

The Consensus for the EPS was 1,38. Reported EPS was 1,27 so the stock trades lower on 19th of October 2017 at 107,15$ per share.

See: http://www.barrons.com/articles/philip-morris-oops-1508425568?mod=wsjde_finanzen_wsj_barron_tickers

Reasons for the lower EPS were currency impacts and shipment volumes of cigarettes were lower. However they are doing great with new risk reduced products like IQOS.

See: https://www.fool.com/investing/2017/02/03/this-philip-morris-international-product-is-flying.aspx

See: https://www.fool.com/investing/2017/10/19/why-cant-philip-morris-international-catch-a-break.aspx


IQOS - Device (I Quit Ordinary Smoking)

Philip Morris developed a electronic device IQOS which is protected with patents like Nespresso. BAT developed a similar product with the name GLO. The design of the IQOS holder looks much better than the GLO device.

See: https://financhill.com/blog/uncategorized/iqos-vs-ifuse-whos-doing-next-gen-electronic-cigarettes-better/

I also searched some feedback videos on youtube on the taste of GLO and IQOS. The IQOS smoke seems to taste better than the GLO smoke of BAT. Here are the two test videos I found:

Glo - Test with negative results on taste: See: https://www.youtube.com/watch?v=asDJxYulTSY
IQOS - Test video: https://www.youtube.com/watch?v=YOtVKnGVuqg

There is also a e-cigarette like product called Ploom Tech which is created by Japan Tobacco International. That system works with a liquid not with traditional tobacco.

See: https://www.youtube.com/watch?v=m0wg3Tm7Cqk

You can find a picture of the IQOS device at:
https://www.test.de/Iqos-Tabakerhitzer-Nicht-ohne-gesundheitliche-Risiken-5215981-0/

The tests on the test markets were successful and Philip Morris starts production and sales worldwide with IQOS which should result into additional earnings soon. However current stock prices already include some fantasies about earnings with IQOS.

See: https://www.tobaccoreporter.com/2016/06/all-eyes-on-iqos/

You can find another comparison article of these new products in the following article. Also keep in mind that the new IQOS device cannibalizes into the existing cigarettes market. If it is the superiour product however the market share of PMI could increase dramatically over the next 5 years. You can see the market share improvements in the test market in Japan already in the third quarter earnings release.

In Japan the PMI Market total market share increased from 27,9% in Q3 2016 to 33,2% in Q3 2017 as Heat Sticks (Insertables of IQOS) increased from 3,5% to 11,9%.

(Source: PMI earnings release Q3 2017 web cast)

The same strong momentum can be seen in Korea. There the heets market share increased from 0,2% to 2,5%.

(Source: PMI earnings release Q3 2017 web cast)

Other European states and test markets show the same strong increases in market share of IQOS.

The other IQOS growing heated tobacco market shares look as follows:

Italy: 0,1% in Q3 2016 to 0,7% in Q3 2017
Switzerland: 0,4% in Q3 2016 to 1,0% in Q3 2017
Portugal: 0,1% in Q3 2016 to 0,8% in Q3 2017
Romania: 0,1% in Q3 2016 to 0,8% in Q3 2017
Greece: 0% in Q3 2016 to 1,4% in Q3 2017

(Source: PMI earnings release Q3 2017 web cast)

You can find another comparison of these new products by the different tobacco companies in the following article.

See: https://www.vaporl.com/blog/post/ibuddy-i1-iqos-ploom-glo/#

There is also another device review on youtube that concludes the IQOS will reach highest sales of the three devices (Ploom Tech, GLO, IQOS).

See: https://www.youtube.com/watch?v=bdOCDB6D9WI


Due Diligence About Ownership

72,27% of Philip Morris is owned by large financial institutions like BlackRock Inc. As they are money-management firms with value based strategies this seems to be a good sign to me.

See: http://www.nasdaq.com/symbol/pm/institutional-holdings



Balance Sheet Analyses

Quick Ratio: 0,60
Current Ratio: 1,10
ROE: not applicable - there is no equity
ROA: 19,00%
ROI: 49,10%
P/B: not applicable - there is no equity
P/E: 23,58


A Final Word In Regards Of Risks Involved

If you are new on this blog please read through the introduction (the big picture) before following my strategy and advises. You can find this introduction here.

Conclusion

In times of crisis people continue to buy cigarettes. Some even buy cigarettes as an alternative value for money if they fear that money becomes worthless in a country. Even if money became worthless you can still pay for your daily necessities with cigarettes. From that perspective the cigarettes market and business will be hear to stay. Philip Morris pays you a nice dividend yield of 3,73% on your invested capital. Etoro pays you the dividend for your CFD Investment so you cover inflation with the dividend. In times of crisis you can dollar cost average into Philip Morris and take some profits when the crisis is over. However the biggest risk for Philip Morris is additional government regulations that prevent smokers from smoking e.g. at certain places. However until now smokers continue to smoke and share prices of Philip Morris International continue to rise accordingly.