Is British American Tobacco A Value Trap?

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slowtraveler
Posts: 718
Joined: Sun Jan 11, 2015 10:06 pm

Is British American Tobacco A Value Trap?

Post by slowtraveler » Sun Dec 16, 2018 3:51 am

BTI has a solid 8+% dividend. From the Value Line Report, it's debt is less than its equity. Stable cash flow. International sales.

A menthol ban scare is current but it seems oversold. The recent buyout of RAI seems to also have an influence on the share price. It had a recall of a vaping product, I believe, but this seems a small percent of their overall sales.

Some thing I have noticed is that no insiders seem to be buying it unless through DRIP or "EX" means buying.* Yahoo finance has a long thread which details some potential problems with debt being taken on to buy RAI but the debt:equity seems reasonable from the Value Line report. Interest coverage stands at 6.2x, so it's reasonable.

I know I'm missing something but what is it? This has been my biggest loser and I'm curious to buy more but I want to find out what's there that I'm not seeing.


*https://www.stockopedia.com/share-price ... -dealings/

joef
Posts: 5
Joined: Sat Aug 11, 2018 8:20 pm

Re: Is British American Tobacco A Value Trap?

Post by joef » Sun Dec 16, 2018 7:40 pm

If you look at the company profits around 15 percent is from the US market. While they do make a lot of money from the menthol cigarettes in the US market (I think around 30-40 percent of cigarettes sold in US), even if the menthol ban were to happen it would not destroy the profitability. Most methol smokers would switch to regular cigarettes instead of quitting entirely. The other issue with the company is the Brexit situation which has investors negative on British companies in general. Personally, I bought around the current price as I see these issues as temporary and the company is still a cash cow and I don't worry over the sustainability of it's dividend.

J_
Posts: 608
Joined: Tue Nov 01, 2011 4:12 pm
Location: Netherlands/Austria

Re: Is British American Tobacco A Value Trap?

Post by J_ » Sun Dec 16, 2018 9:25 pm

BTI is a HHT *! Better avoid these kind of stocks.

joef
Posts: 5
Joined: Sat Aug 11, 2018 8:20 pm

Re: Is British American Tobacco A Value Trap?

Post by joef » Mon Dec 17, 2018 1:42 am

HHT? Can you explain what that means

J_
Posts: 608
Joined: Tue Nov 01, 2011 4:12 pm
Location: Netherlands/Austria

Re: Is British American Tobacco A Value Trap?

Post by J_ » Mon Dec 17, 2018 8:14 pm

Health Hazard Trap.

Dream of Freedom
Posts: 286
Joined: Wed Aug 29, 2012 5:58 pm
Location: Nebraska, US

Re: Is British American Tobacco A Value Trap?

Post by Dream of Freedom » Tue Dec 18, 2018 4:55 am

:? It may not be company specific. The entire sector is down 18.20% for the year and has far under performed the S&P. Neither Credit Suisse nor CFRA have reports up for it though and I don't feel like going through the annual reports for a post. :roll:

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