In this article, we discuss 10 best tobacco and cigarette stocks to buy. If you want to see more stocks in this selection, check out 5 Best Tobacco and Cigarette Stocks To Buy.
The global tobacco products market grew from $234.84 billion in 2021 to $250.51 billion in 2022, demonstrating a compound annual growth rate of 6.7%. The Russia-Ukraine war hindered the chances of global economic recovery following the COVID-19 pandemic, at least in the near-term. This impacts the growth of the tobacco sector as well, despite it being relatively defensive. The tobacco products market is forecasted to reach $287.09 billion in 2026 at a CAGR of 3.5%. The world's population, which is currently at 8 billion, is growing steadily and is expected to be 10 billion by 2050. This will create higher demand for tobacco products in the future.
The demand for tobacco has lately seen a shift from the developed countries to the developing regions such as Asia and Africa. This can be due to the rising population, increasing income levels, and relaxed government regulations. The tobacco market is putting out multiple premium tobacco products such as flavored, long and skinny, coloured and e-cigarettes, which has created an optimistic outlook for future growth. A boost in research and development investments has led to the introduction of nicotine products with lower levels of toxicants. This has attracted a bigger consumer-base for tobacco products.
We selected the following tobacco, cigarette, e-cigarette, and cannabis stocks based on positive analyst coverage, strong business fundamentals, and market visibility. We have assessed the hedge fund sentiment from Insider Monkey’s database of 920 elite hedge funds tracked as of the end of the third quarter of 2022. The list is arranged according to the number of hedge fund holders in each firm.
Best Tobacco and Cigarette Stocks To Buy
10. Cronos Group Inc. (NASDAQ:CRON)
Number of Hedge Fund Holders: 8
Cronos Group Inc. (NASDAQ:CRON) was founded in 2012 and is based in Toronto, Canada. It operates as a cannabinoid company that manufactures, markets, and distributes hemp-derived supplements and cosmetic products under the Lord Jones and Happy Dance brands in the United States. The company also specializes in the cultivation and manufacture of cannabis and cannabis-derived products for the medical and adult-use markets. Cannabis stocks recently gained and rallied after President Joe Biden signed a marijuana research bill into law at the beginning of December.
On November 8, investment advisory Canaccord maintained a Buy rating on Cronos Group Inc. (NASDAQ:CRON) but lowered the firm's price target on the shares to C$4.75 from C$5. Analyst Matt Bottomley issued the ratings update.
According to Insider Monkey’s third quarter database, 8 hedge funds held stakes worth $35.4 million in Cronos Group Inc. (NASDAQ:CRON), compared to 5 funds in the prior quarter worth $35.2 million. Traci Lerner’s Chescapmanager LLC is the largest stakeholder of the company, with 8.3 million shares worth $23.4 million.
Like Philip Morris International Inc. (NYSE:PM), The Scotts Miracle-Gro Company (NYSE:SMG), and Altria Group, Inc. (NYSE:MO), Cronos Group Inc. (NASDAQ:CRON) is one of the best tobacco stocks to consider.
9. Aurora Cannabis Inc. (NASDAQ:ACB)
Number of Hedge Fund Holders: 9
Aurora Cannabis Inc. (NASDAQ:ACB) is headquartered in Edmonton, Canada, and the company produces, markets, and sells cannabis and cannabis-derivative products in Canada and internationally. Aurora Cannabis Inc. (NASDAQ:ACB) commercializes medical and consumer cannabis products in Canada, and provides wholesale medical cannabis in the European Union, Australia, Caribbeans, South America, and Israel, and the United States. It is one of the premier tobacco stocks to invest in.
On December 5, Aurora Cannabis Inc. (NASDAQ:ACB) announced that it has repurchased $76.1 million principal amount of its convertible senior notes at a total cost, including accrued interest, of $73.8 million in cash in an effort to lower debt and annual cash interest costs. Over the last year, Aurora Cannabis Inc. (NASDAQ:ACB) has repurchased $235 million of its convertible senior notes, leading to annual cash interest savings of $12.9 million. The company reaffirmed its forecast of achieving adjusted EBITDA profitability by December 31, 2022.
Piper Sandler analyst Michael Lavery on September 21 maintained a Neutral rating on Aurora Cannabis Inc. (NASDAQ:ACB) but lowered the price target on the shares to $3 from $4. The company's fiscal Q4 results were mostly as forecasted, with some margin constraints due to a higher sales mix of lower margin recreational cannabis, the analyst wrote in a research note. The analyst expects that Aurora Cannabis Inc. (NASDAQ:ACB)’s cost saving efforts should support "significant" sequential margin improvement as he models the company reaching positive adjusted EBITDA by Q3 2023.
According to Insider Monkey’s database, 9 hedge funds held stakes worth $47.4 million in Aurora Cannabis Inc. (NASDAQ:ACB) at the end of the third quarter of 2022, compared to 10 funds in the prior quarter worth $45.7 million. Jim Simons’ Renaissance Technologies held a significant position in the company, comprising 4.25 million shares worth $5 million.
8. Canopy Growth Corporation (NASDAQ:CGC)
Number of Hedge Fund Holders: 13
Canopy Growth Corporation (NASDAQ:CGC) was incorporated in 2009 and is headquartered in Smiths Falls, Canada. The company engages in the production, distribution, and commercialization of cannabis and hemp-based products for recreational and medical purposes in Canada, the United States, and Germany. It operates through two segments, Global Cannabis and Other Consumer Products. Canopy Growth Corporation (NASDAQ:CGC)’s products include dried cannabis flower, extracts and concentrates, beverages, gummies, and vapes. It is one of the best tobacco stocks to monitor.
Canopy Growth Corporation (NASDAQ:CGC)’s Q3 2022 revenue of C$117.86 million outperformed market estimates by C$4.77 million. The company cited a record quarter for BioSteel, the stabilization of its Canadian cannabis business, and continued actions to reduce overall costs for the solid Q3 results.
According to Insider Monkey’s third quarter database, 13 hedge funds were bullish on Canopy Growth Corporation (NASDAQ:CGC), with collective stakes worth $73 million, compared to 10 funds in the earlier quarter worth $21 million. Stephen Mildenhall’s Contrarius Investment Management is the leading position holder in the company, with nearly 20 million shares worth $53.8 million.
7. British American Tobacco p.l.c. (NYSE:BTI)
Number of Hedge Fund Holders: 14
British American Tobacco p.l.c. (NYSE:BTI) was incorporated in 1902 and is headquartered in London, the United Kingdom. The company provides tobacco and nicotine products to consumers worldwide, including vapor, tobacco heating, modern oral nicotine products, combustible products, as well as traditional oral products such as snus and moist snuff. On December 8, British American Tobacco p.l.c. (NYSE:BTI) announced that it expects revenue growth of 2% to 4% at constant currency rates in FY 2022, as the market for e-cigarettes and oral nicotine products is growing. The company is confident in achieving a target revenue of £5 billion, as well as profitability by 2025.
On December 1, investment advisory JPMorgan maintained an Overweight rating on British American Tobacco p.l.c. (NYSE:BTI) but lowered the firm's price target on the shares to 4,000 GBp from 4,500 GBp. Analyst Jared Dinges issued the ratings update.
Among the hedge funds tracked by Insider Monkey, 14 funds were long British American Tobacco p.l.c. (NYSE:BTI) at the end of September 2022, compared to 17 funds in the last quarter. Rajiv Jain’s GQG Partners is the leading position holder in the company, with 33.25 million shares worth $1.18 billion.
“Distillate Capital’s International FSV Strategy is less expensive, more fundamentally stable, and less levered than the benchmark All Country World Ex U.S. (ACWI-EX US) Index. The largest new position is British American Tobacco (NYSE:BTI), which was not owned previously due to leverage, but now passes that threshold and offers an 11% free cash flow to market cap yield.”
6. Turning Point Brands, Inc. (NYSE:TPB)
Number of Hedge Fund Holders: 14
Turning Point Brands, Inc. (NYSE:TPB) was founded in 1988 and is headquartered in Louisville, Kentucky. The company manufactures, markets, and distributes rolling papers, tubes, finished cigars, make-your-own cigar wraps, moist snuff tobacco, loose-leaf chewing tobacco, cannabidiol isolate, and liquid vapor products. The company operates through three segments – Zig-Zag Products, Stoker's Products, and NewGen Products.
On November 2, Turning Point Brands (NYSE:TPB) declared a quarterly dividend of $0.06 per share, in line with previous. The dividend is payable on January 6, 2023 to shareholders of record on December 16. On October 26, the company posted a Q3 non-GAAP EPS of $0.72 and a revenue of $107.8 million, outperforming Wall Street estimates by $0.12 and $1.6 million. Combined net sales increased 17.7% for Zig-Zag and Stoker’s Products.
According to Insider Monkey’s Q3 data, 14 hedge funds reported owning stakes worth $81.4 million in Turning Point Brands (NYSE:TPB), compared to 16 funds in the prior quarter worth $76.5 million. Nathaniel August’s Mangrove Partners held a prominent position in the company, consisting of 790,974 shares worth $16.8 million.
In addition to Philip Morris International Inc. (NYSE:PM), The Scotts Miracle-Gro Company (NYSE:SMG), and Altria Group, Inc. (NYSE:MO), Turning Point Brands (NYSE:TPB) is one of the best tobacco stocks to invest in.
Here is what Maran Capital Management has to say about Turning Point Brands, Inc. (NYSE:TPB) in its Q3 2021 investor letter:
“At Turning Point Brands, the tail is wagging the dog. TPB has three segments, Zig Zag rolling papers, Stokers smokeless tobacco, and “New Gen,” a collection of investments in vaping and other alternative products. Zig Zag and Stokers are both performing very well, together run-rating approximately $100mm of annual EBITDA. Zig Zag is benefitting from the ongoing trend of cannabis legalization, and Stokers is a low-cost, high-quality competitor in its niche, taking share and operating under a pricing umbrella. New Gen, though, is struggling and operating at close to break-even levels. It is this third segment that investors seem to be focused on. The stock is cheap even assuming New Gen is worth nothing, and I believe risk-reward is asymmetrically skewed to the upside.”
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Disclosure: None. 10 Best Tobacco and Cigarette Stocks To Buy is originally published on Insider Monkey.