Tobacco stocks have been lighting up the markets in the past year and international competitors are seeing gains. Is there still room to invest while they’re hot? Nik Modi, executive director and senior analyst at UBS, shared his ideas for the sector.
“It’s going to be another good year for tobaccos,” Modi told CNBC.
“Since 1995, tobacco stocks have outperformed the market 13 out of the last 15 years, whether it’s been a bear or a bull market.”
Modi said the stocks have attractive valuations on a P/E and dividend yield basis and thinks the industry's pricing power will remain strong.
“And lastly, if you look across the consumer staples, tobacco is insulated from the key uncertainties out there, such as movements in currencies and changes in the commodities market,” he said. “So we’re pretty bulled up for 2010.”
Modi’s Tobacco Picks:
Altria —Modi has a $25 price target on Altria.
Lorillard —Modi has a $100 price target on Lorillard.
- Watch Modi's Previous Appearance on CNBC (July 30, 2009)
More Market Views:
- 7 Dividend Plays For Investors: Stock Pickers
- Expect Strong Market Through January: S&P's Stovall
- Where the Next Bubbles May Grow: Chief Strategist
CNBC Data Pages:
More Tobacco Companies:
Phillips Morris International
British American Tobacco
Modi does not own shares of MO, LO or RAI.