British American Tobacco p . l . c . ( BTI ): A Bull Case Theory
The bullish thesis on British American Tobacco (BTI) p.l.c. by Waterboy Investing highlights several reasons why the company could be a good investment despite facing temporary challenges. BTI, a century-old tobacco giant, is considered an Unpopular Large Cap due to declining cigarette volumes, government regulations, and the rise of ESG-friendly investments. However, BTI remains a cash-generating powerhouse, producing $13.07 billion in free cash flow and offering a robust dividend yield of 9.3%. BTI s diversified portfolio includes well-known cigarette brands, which contribute roughly 80% of its revenue, and reduced-risk products (RRPs) accounting for the remaining 20%. The company has been able to offset the decline in global cigarette consumption through its pricing power. To sustain future growth, BTI has committed to investing in non-combustible products. BTI generates half of its revenue from the U.S., while the other half comes from international markets where smoking remains prevalent. This positions the company well to benefit from any potential weakening of the dollar. The industry s regulatory environment has created high barriers to entry, protecting BTI s market share. BTI s management has been actively managing the company s finances, paying down debt, initiating buybacks, and maintaining a steady dividend payout. The recent sale of its ITC stake has provided additional funds for share repurchases, which should further enhance shareholder value. Despite the market s negative sentiment towards the stock, the current price reflects a temporary mispricing rather than a fundamental weakness. BTI s low valuation—5.3x price-to-free-cash-flow—offers an attractive entry point. Even with no growth, the stock s 10.5% shareholder yield ensures a strong return, making BTI a good investment with limited downside risk. However, the article also acknowledges that some AI stocks may hold greater promise for delivering higher returns within a
Source: insidermonkey.comPublished on 2024-09-23
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