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Holly LaFon
Holly LaFon
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David Winters Comments on Altria Group

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March 07, 2019 | About:
In the Fund’s 2018 semi-annual report shareholder letter, we described one component of our sell discipline – selling a security when we believe it becomes fairly valued. Another important component of our sell discipline is to evaluate the actions of management; if there is a fundamental change in management’s decision, direction or focus, we carefully analyze the situation and may determine it is time to reduce or exit a position. An example of this occurred with long-time portfolio holding Altria Group, Inc. (“Altria”). For years, Altria satisfied Wintergreen’s three core investment principles: first, a business that has good or improving economics, and often generates sales and profits in multiple currencies and jurisdictions; second, a management team that is working for the benefit of all shareholders and not just for its own short-term compensation; and third, the security being available at a compelling price.

As a tobacco company, Altria (NYSE:MO) has long been regulated by the U.S. Food and Drug Administration (the “FDA”). The FDA has the authority to regulate tobacco products to protect public health and also to regulate nicotine and other ingredient levels in tobacco products. The FDA has not approved marijuana as a safe and effective drug for any intended indication, and the FDA is also responsible for regulating electronic smoking products. In this regulatory environment, we were alarmed by Altria’s decision in December 2018 to make a multibillion-dollar investment in a Canadian cannabis producer. Immediately following this investment, Altria announced it was making a $12.8 billion dollar investment in Juul Labs, the maker of an electronic device that has received considerable FDA attention due to its popularity among underage users. We found these management decisions a clear departure from the course of actions we had previously viewed as a conservative management team. As a result, the Fund reduced its investment in Altria in 2018 at a substantial profit for shareholders, and completely exited the position early in 2019.

From David Winters (Trades, Portfolio)' Wintergreen Fund (Trades, Portfolio) fourth-quarter 2018 shareholder letter.

About the author:

Holly LaFon
I'm a financial journalist with a Master of Science in journalism from Medill at Northwestern University.

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