How Will E-Cigarette Trends Affect Stocks?
Because of this, it will be important to look for individual sectors that are undervalued and still well-positioned for growth over the long term.
Watching Industry Trends"In UK markets we are acutely aware of the trends that are happening in the US, as this is likely to be matched in the UK, as well," said Sam Hadi at CloudCig. "Industry trends call for a continued rise in sales, as consumers make the shift away from the much more harmful paper cigarettes." When looking at the US markets, roughly 2.8% of the adult consumer population has already tried a product released by an e-cigarette company, which is largely surprising given the fact that comparatively little resources have been spent on marketing and advertising campaigns. Consumers appear to be willing to make the change to new products even though they have not become a large part of the media just yet. From a cultural perspective these are still very new products, so the much better than expected sales numbers should be viewed as a significant surprise and an indication that long term trends are certainly changing.
Well-Positioned StocksThese sales numbers have already translated to significant improvements in the corporate earnings figures for a number of companies. As long as these trends continue, the companies that have devoted resources in these areas will also see gains. For those looking to gain global exposure, British American Tobacco (BTI) creates some interesting opportunities for investors focuses on UK companies with an international reach. The company owns several outlets in Europe in addition to a nearly 50% stake in Reynolds American, which means that the company will continue to have access to a wide variety of geographical markets. These are also some of the most important sales markets, so there are few companies that are likely to see performances that are as strong as British American Tobacco.
When looking at these stocks from an industry perspective, it will be important to continue paying attention to the companies that were established early in the e-cigarette space. The best example here can be found in Lorillard (LO), which continues to maintain one of the strongest presences in these new markets. If we see stronger numbers at Lorillard, we should see many other large companies start to jump on the e-cig bandwagon. This is something that has already been done by Altria (MO). So, in this group, we can see a collection of companies that should see long term gains based on the changing demographics of the cigarette smoking constituency.
By Richard Cox