Hello friends. Smoking is a popular way to self medicate the sadness that can come along with a recession. And make no mistake, a recession is VERY likely. Polymarket, a prediction market where you can Bet On Your Beliefs, currently predicts a whopping 86% chance of a recession in Q2 of 2022. And for the entire year of 2022, a recession is almost a certainty.
Let's say a consumer is laid off from their job, and no longer cares about anything anymore. They figure that dying of cancer would be a blessing, an end to their suffering. They might as well try smoking, they reason. Maybe it will make them feel better. Now, it won't make them feel better, but it WILL get them addicted, which means a long term customer providing great profits for Imperial Brands! In essence, we view it as a consumer staple, because smokers will not quit smoking just because they don't have money for it. They will always find a way to get their nicotine!
Imperial Brands is a stock with a P/E GAAP (TTM) of 7.59 and potential for slow but steady growth. It's in the tobacco sector, a sector severely hated by retail traders. This hatred has caused the stock to have an extremely cheap valuation. Another sector that was recently hated to a similar degree by retail was the energy sector. They hated it because of it's poor momentum. That was basically their only real reasoning. Then they changed teams and now they love it since the momentum is back to the upside. The lesson? Weak momentum doesn't mean a weak stock. In fact, weak momentum is usually when you want to be looking for good deals. And we think that right now, Imperial Brands is a very good deal.
They are also offering a delicious dividend of 4.89% for long term investors, which we think they can afford to continue to pay off. On top of this, they are planning to launch a huge buy-back program. The genius of buying back stocks is that it will ignite momentum through increased demand for shares, which will cause retail investors to start getting excited, creating even more momentum, and so the cycle goes on, and from there we have the potential see a straight up bubble within the tobacco stock market just like the energy sector formed recently.
Our plan is to DCA into a position on IMBBY, and hold it until either the P/E expands substantially, or the price reaches our long-term target of $63.46. This position may take many years to come to fruition, but we think that it has an extremely high probability of playing out in our favour.
Thanks for playing.
Let's say a consumer is laid off from their job, and no longer cares about anything anymore. They figure that dying of cancer would be a blessing, an end to their suffering. They might as well try smoking, they reason. Maybe it will make them feel better. Now, it won't make them feel better, but it WILL get them addicted, which means a long term customer providing great profits for Imperial Brands! In essence, we view it as a consumer staple, because smokers will not quit smoking just because they don't have money for it. They will always find a way to get their nicotine!
Imperial Brands is a stock with a P/E GAAP (TTM) of 7.59 and potential for slow but steady growth. It's in the tobacco sector, a sector severely hated by retail traders. This hatred has caused the stock to have an extremely cheap valuation. Another sector that was recently hated to a similar degree by retail was the energy sector. They hated it because of it's poor momentum. That was basically their only real reasoning. Then they changed teams and now they love it since the momentum is back to the upside. The lesson? Weak momentum doesn't mean a weak stock. In fact, weak momentum is usually when you want to be looking for good deals. And we think that right now, Imperial Brands is a very good deal.
They are also offering a delicious dividend of 4.89% for long term investors, which we think they can afford to continue to pay off. On top of this, they are planning to launch a huge buy-back program. The genius of buying back stocks is that it will ignite momentum through increased demand for shares, which will cause retail investors to start getting excited, creating even more momentum, and so the cycle goes on, and from there we have the potential see a straight up bubble within the tobacco stock market just like the energy sector formed recently.
Our plan is to DCA into a position on IMBBY, and hold it until either the P/E expands substantially, or the price reaches our long-term target of $63.46. This position may take many years to come to fruition, but we think that it has an extremely high probability of playing out in our favour.
Thanks for playing.