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After The Mac-And-Cheese Goes, Buy Altria: Analyst


It's a stock-watcher's cliché to call Altria shares "smoking" -- but don't tell that to Bonnie Herzog. She's a beverage and tobacco analyst at Citigroup, and she says the company formerly known as Philip Morris is, yes, on fire.

Herzog told "Closing Bell" that as Altria sheds more and more of its Kraft Foods subsidary, the loss of blue-boxed macaroni-and-cheese and Oreos cookies is Altria's gain -- permitting the latter to focus on its cigarette business, which includes lucrative brands like proto-feminist-oriented Virginia Slims, budget-conscious Basic and Merit, and Marlboros. The latter is itself a worldwide sales phenomenon: Altria says that in the U.S. alone, for the full-year 2005, four of every ten cigarettes sold had the iconic Marlboro name.

On Friday, 2,200 Kraft "put" contracts changed hands. Herzog predicts that after the final March spinoff of Kraft, investors will overrun Altria to take advantage of "global tobacco" opportunities. And she enthuses that "the real fun" will begin after the firm splits Philip Morris International off from its U.S. business -- leading CNBC's Dylan Ratigan to ask for her take on legal questions facing tobacconists. Herzog noted the ever-present possibility of courtroom tangles, but said that every day that passes without a new development increases the odds, in her view, that the company will emerge from "headline" troubles unscathed.

And Altria's clean legal bill of health is likely to continue into the future: Herzog said "they already have technology" for a less carcinogenic cigarette. That tech "is the future," she declares. Of the many stocks she covers, the analyst says Altria "is the one" for 2007 -- and beyond.

Full disclosure: The analyst's employer, Citigroup, owns a significant number of shares in Altria; and Altria is an investment banking client of Citigroup.