Warren Buffett has avoided direct investments in the cigarette industry because he is not comfortable with the product. Tom Russo however owns shares in Philip Morris International (PM), British American Tobacco (BTI) and Altria (MO). Why does he own them?
- These tobacco companies are taking the cash flow from developed markets and using it to grow demand in the developing markets which are having population growth.
- Russo thinks these companies are somewhere between growth and value companies.
- E-cigarettes are a new product that could create some growth domestically.
- When asked whether the decrease in cigarette demand would eventually decrease in China and other countries as it has in the U.S. Russo agreed that it would over time.
Here is the link to the radio interview with Bloomberg’s Tom Keene and Russo: