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S&P 500 Watch: What Got Us Here?

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Reynolds American (RAI) is a company that has been one of the leaders in the S&P 500's growth. It is the parent of R.J. Reynolds -- America's #2 cigarette maker. In March 2000, Reynolds American was an $8 stock.

Today, RAI trades around $66. The company’s impressive growth stems in part, from the leadership of CEO Susan Ivey who joins the guys for this conversation.

Are you comfortable with the litigation scenario around the world?

“The litigant environment has improved and that’s shown by the confidence investors have shown in the stock,” says Ivey.

How do you survive the decline of U.S. smokers?

Cigarette consumption is declining and that will continue. She says that Reynolds American will grow market share in a declining industry and has 3 operating subsidiaries that are in growth segments – specifically the Conwood companies in the smokeless arena (chewing tobacco).



What’s the growth?

“That sector is growing at 5%- 6% and the Conwood companies are leading the growth in that category,” says Ivey.

Asia is seen as a growth market – is it as explosive as perceived?

“We are not exposed extensively in Asia,” says Ivey. “We do have some business in Japan and Europe, but our business is focused on the U.S. domestic market. And RAI is committed to sustainable - single digit earnings growth.”

What about the Gallagher Group joint venture that terminates in November?

“We’re looking for alternatives, but confident that Natural American Spirit Brand will continue growth in Europe and we’ll find a mechanism to insure that happens," says Ivey.

Why is the Street so enthusiastic about your company and the sector?

“We are committed to harm reduction and competing in a regulatory environment," says Ivey. "Investors are enthusiastic because the company delivered an 85% stock increase since the merger… and a 75% dividend pay-out ratio and a 5% yield.” Ivey is confident in the sustainability in earnings.

Dylan Ratigan asks the panel what they think of this stock?

Eric Bolling says since the Supreme Court of Florida overturned a decision against Altria (MO) he sees a clear path for the tobacco companies, and they're going to continue to go higher.

Guy Adami says this stock is great, along with Altria.

Pete Najarian thinks it’s a buy.

Jeff Macke says the stocks will triple if they come out with harm reduction products, but that’s the only way they can grow.

Symbol
Price
 
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MO
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RAI
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Trader disclosure: On May 22, 2007, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders: Macke Owns (SWY); Najarian Owns (MDT), (STI); Bollings Owns Coffee, Sugar, Gold, Silver, March Natural Gas Futures, Is Short April Natural Gas Futures