Imperial Brands Azione Forum

It was an honor for me (over 40% plus). Slowly but surely I am reducing tobacco from my portfolio as an individual position. I still have $MO (+1,67%)
$BATS (+0,49%) and $IMB (+0,14%)

Week in review 12.10.

All-time highs for S&P 500, Dow Jones, Air Products & Chemicals, American Express, Arista Networks, Bank of New York Mellon, BlackRock, Caterpillar, CAVA, Fiserv, GE Vernova, Goldman Sachs, Mastercard, Morgan Stanley, Motorola Solutions, Piper Sandler, Royal Caribbean, Uber, Unum

52-week highs for Carnival, Commerzbank, GE Aerospace, Hilton Worldwide, MicroStrategy, Norwegian Cruise, Palantir, Ralph Lauren, Robinhood Markets, Sea Ltd. , Shake Shack, Tangier, Teledyne

Tesla Cybercab / Robotaxi planned from 2026 for under 30,000$. In addition, an autonomous bus with 20 seats was presented, share falls -8.1%, market is disappointed, -19% 1-year performance

Nvidia partner Hon Hai increases capacity to meet "crazy" AI demand, Nvidia shares +8.3% this week, +176% 1-year performance

AMD unveils MI325X AI accelerator to compete with Nvidia's H200, customers include Google, Microsoft, OpenAI, Dell, Oracle, Meta, Hewlett Packard Enterprise, Supermicro, Lenovo and Databricks, AMD launches EPYC 5th Gen Datacenter CPU to compete with Intel's Xeon, AMD currently has 34% market share in Datacenter CPUs, MI350 coming in 2025 to compete with Nvidia's Blackwell, AMD stock drops -4%, apparently sell the news event, +45% 1-year performance

92% of desktop processor sales at major German online retailer Mindfactory were from AMD last week, Intel only at 8% share and -36% 1-year performance

TSMC with good quarterly figures, share price rises slightly, +97% 1-year performance

JPMorgan with good quarterly figures, share +5.1%, +48% 1-year performance

Wells Fargo with good quarterly figures, share +6.5%, +49% 1-year performance

PepsiCo and Samsung with poor quarterly figures, shares fall slightly

Amazon Pharmacy announces same-day delivery of prescription drugs in 20 more US states and expands its service to almost half of the states in 2025, +43% % 1-year performance

Jefferies says Apple's hopes for an AI phone are overdone and high expectations are premature, Hold rating, +26% 1-year performance

The situation is similar at Microsoft after Oppenheimer downgraded its rating from "Outperform" to "Perform", it was the second such downgrade by analysts in recent weeks, AI sales are overestimated and shares have underperformed since July due to "AI fatigue", plus losses at OpenAI, +26% 1-year performance

Two Google scientists from the subsidiary DeepMind receive the Nobel Prize in Chemistry, they developed the AI model "AlphaFold2", which can be used to predict the structures of all 200 million known proteins, the AI is used in 190 countries, for example in the clarification of antibiotic resistance or the use of enzymes to break down plastics, Alphabet shareholders like this, +12% 1-year performance

Inperial Brands increases dividend, now pays out quarterly and buys back shares, share price rises 5%, +36% 1-year performance

FTX - customers will soon get their balances paid out after the crypto exchange went bankrupt in 2022 and the management was imprisoned

Shortseller Hindenburg Research with allegations of fraud and safety concerns for children at gaming service Roblox, share price falls -6%, even -70% since November 2021

After two very positive weeks, China stocks fall like a flash in the pan as the market expected more stimulus from the Chinese dictator. Dictator, Hang Seng with worst day since the 2008 financial crisis, this week

China strengthens real estate sector and signals more spending ahead, Finance Minister announces measures to support real estate sector today and government would now have more room to borrow and increase deficit, China also announces issuance of special government bonds today to bolster capitalization of its largest state-owned banks, Printer is coming

Fitch downgrades France's credit rating to negative due to higher deficits, government debt expected to rise to 118.5% of GDP by 2028

FTSE Russell: Greek equities on track for upgrade to developed markets, FTSE Russell to provide update as part of March 2025 review, Greek equity index up 53% since start of 2023

Porsche sells 7% fewer cars due to China slump by -29%, -5% North America but +7% Germany & Europe, -21% % 1-year performance

Deutsche Telekom increases dividend and launches share buyback program for € 2 bn, highest share price in 23 years, +33% 1-year performance

Commerzbank reaches highest share price since the euro crisis in 2011, +61% 1-year performance

Bayer with new lawsuit in the USA over PCBs, share price -7%, -41% 1-year performance

German industrial order intake fell unexpectedly sharply by 5.8% in August compared to the previous month

E.on CEO expects energy prices to rise in the long term thanks to higher taxes & levies and the world's stupidest energy policy

The Ampel expects the economy to shrink for the second year in a row, revising its GDP forecast for 2024 from +0.3% to -0.2%, only the second consecutive year of shrinking GDP since the fall of communism in 1990

After the pension insurance, the German long-term care insurance is also bankrupt, as recipients of citizens' benefits are not paying in and society is ageing, Lauterbach therefore wants to increase the monthly contribution for long-term care for all workers, so soon less net from gross again

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$GOOGL (-0,6%)
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$RBLX
$BLK

$BATS (+0,49%) I added this share to my portfolio a few months ago at a buy in of 29.3 for 10k.

Now the profit stands at 2.4k including a distribution of approx. 270€.

I am undecided as to whether I should continue with the buy & hold principle or sell part of the position so that it is back at 10k and switch to other shares such as $GOOGL (-0,6%)
$IMB (+0,14%) or ETFs.

What would you do?

5 STOCKS 4 LIFE

Reading time: approx. 6min

INTRODUCTION

A while ago, I came across an interesting thought experiment in an article: "What 5 stocks would you buy right now if you knew you had to hold them for the rest of your life and you weren't allowed to buy any other stocks?"

In the age of €1 order fees and the ability to trade shares virtually around the clock on your smartphone, this is of course not a realistic scenario, but the question was so interesting for me that I thought about which 5 shares I would buy.

I quickly decided on my 5 stocks. I currently hold all five in my portfolio. Similarities between the 5 stocks I had chosen quickly became apparent:

• mostly platform business model or platform-like
• at least one major and very long-term growth trend intact
• Consistent growth in sales and profits
• high ROCE
• low debt

The current valuation level deliberately played no role at all in my decision, as these are, after all, shares that I want to hold for the rest of my life and my investment horizon is therefore at a maximum. In order to be able to benchmark my decision, I decided to set up my own securities account on Getquin and placed these shares in the securities account at €100,000 each. The shares were then entered into the securities account on May 31.

MY 5 SHARES FOR LIFE

1) Visa $V (+1,22%)

Visa is a leader in digital payments, enabling secure and fast transactions worldwide through its extensive network of payment cards and solutions. Almost everyone here has probably paid with a Visa card at least once in their life.

Business model highlights:

• Duopoly with Mastercard $MA (+0,88%) in the area of payment cards
• Platform business model
• intact growth trend of cashless/digital payments
• No direct credit default risk, as the issuing banks bear the credit default risk of the users

Highlights Key financial figures:

• EBIT margin over 65%
• ROCE permanently above 30%
• Virtually debt-free

Biggest competition:

• Mastercard $MA (+0,88%)
• PayPal $PYPL (+3%)
• Block $SQ (+6,29%)

2) Costco $COST (+3,88%)

Anyone familiar with my previous posts will know that I am 100% convinced by Costco. Costco is a retailer from the USA, but it sets itself apart from traditional retailers with its "retail as a service" business model. In order to shop in one of Costco's many department stores, you first have to take out an annual subscription.

Highlights of the business model:

• Subscription business model ("Retail as a Service")
• Large existing physical network of department stores
• High customer loyalty through subscription and low prices

Highlights Key financial figures:

• very consistent sales, profit and FCF growth
• ROCE consistently above 23
• debt-free

Largest competitor:

• Walmart $WMT (+1,81%)
• Target $TGT (-0,48%)
• BJ's Wholesale $BJ (+2,42%)

3) Microsoft $MSFT (+0,15%)

Similar to Visa, Microsoft probably needs no further introduction to know what an excellent company we are dealing with here. Microsoft earns its money with software subscriptions, cloud services (Azure) and gaming (Xbox), among other things. Everyone is probably familiar with the Windows operating system and the Office 365 productivity suite.

Highlights of the business model:

• a large proportion of sales are recurring and subscription-based
• High customer loyalty thanks to platform business model with Windows and Office 365
• Cloud growth trend is excellently served by Azure;
• the cloud market itself is an oligopoly with high barriers to switching providers
• Very well positioned in the field of AI through cooperation with OpenAI

Highlights Key financial figures:

• EBIT margin consistently above 40%
• ROCE of almost 30%
• Almost debt-free

Largest competitors:

• Operating systems: Apple $AAPL (+0,65%), Alphabet $GOOGL (-0,6%)
• Cloud: Amazon $AMZN (-0,02%), Alphabet $GOOGL (-0,6%)

4) Chipotle $CMG (+1,99%)

Chipotle Mexican Grill is a fast food chain that specializes in the preparation of Mexican dishes. A special focus is placed on comparatively healthy and fresh ingredients.

Business model highlights:

• Clear focus on a difficult but previously underrepresented area of fast food
• No franchise business model and therefore full control over the restaurants
• Long-term trends towards healthier and faster food are served
• not active in the highly competitive low-cost fast food sector

Highlights Key financial figures:

• Increasing profitability
• rising ROCE of now over 22%
• Low debt

Largest competitor:

• McDonald's $MCD (+2,19%)
• Wingstop $WING (+2,92%)
• Texas Roadhouse $TXRH (+1,39%)

5.) Philip Morris International $PM (+1,85%)

Philip Morris International is one of the largest tobacco companies in the world and is the spin-off of the ex-USA business of $MO. In recent years there has been a clear focus on new less harmful products such as IQOS.

Business model highlights:

• Long-term growth trend for the IQOS platform developed in-house and nicotine pouches
• Oligopoly in the area of classic tobacco products
• benefits most from the trend in industrialized countries to increasingly regulate traditional smoking
• huge growth opportunity through market entry of the IQOS platform in the USA is imminent

Highlights Key financial figures:

• EBIT margin of over 35
• ROCE of over 30%

Lowlights Key financial figures:

• High level of debt due to investments in recent years
• Currently almost no sales and profit growth

Largest competitors:

• British American Tobacco $BATS (+0,49%)
• Imperial Brands $IMB (+0,14%)
• Altria $MO (+1,67%)

SUMMARY

At the time of entry into the portfolio, the portfolio consisted of approximately 40% information technology (Visa, Microsoft), 40% consumer staples (Costco, Chipotle) and 20% non-cyclical consumer staples (Philip Morris). All 5 stocks are formally US companies, with Philip Morris currently generating 100% of its sales outside the US. Microsoft and Visa also generate large parts of their sales internationally. However, it is also clear that with 5 stocks, we cannot expect an overly broad diversification.

Which 5 stocks would be your stocks for life and why? Feel free to write your own post with reasons under the hashtag #5stocks4life. To spice things up a bit, I would like to nominate the true ETF pope @Simpson and the dividend king @GoDividend to present your 5 Stocks 4 Life with reasons.

Stay tuned,

Your Michael Scott

#5stocks4life

The UK tobacco ban is off the table for now.

Parliament will be dissolved on 30.05.2024 and the law is not one of those that will come into force by then. So that's it.

That's some good news.

$PM (+1,85%)
$BATS (+0,49%)
$IMB (+0,14%)

Here are a few differences between $BATS (+0,49%)
$MO (+1,67%) and $PM (+1,85%) and why I opted for BAT.

Disclaimer: I've tried to be as brief as possible here, I'm happy to answer questions on specific points. If I have forgotten something, please let me know.

First of all, I think most people know that Altria is Philip Morris USA, so Philip Morris International does not sell cigarettes in the USA (the most important cigarette market).

How is the cigarette market divided?

BAT sells its cigarettes worldwide, there is a division in terms of brands, but that is basically irrelevant. In the USA you can't compete with Altria's brands, in the global market you are just behind Philip Morris International.

Thanks to its strong brand, Altria has a monopoly-like position in the US cigarette market and therefore has pricing power. Altria sells exclusively on the US market.

Philip Morris International is the global market leader (excluding the USA).

This is also the main difference between the companies in terms of their main business. This will change in the future, especially for Altria, as Philip Morris Int. becomes active in the US market.

How will the position of the companies develop in the future?

All three are struggling with falling cigarette sales figures. Even though this is a global trend, the dwindling US market is the most significant.

The US market is particularly essential for Altria, as this is its only sales market for cigarettes. The US market is also very important for BAT, but the slump here is much easier to cope with as the company operates globally. Philip Morris Int. has no problems with this as they operate exclusively outside the USA. Outside the USA, the number of smokers is also steadily decreasing, but not nearly as dramatically. It can therefore be assumed that Altria will have significantly more problems with dwindling cigarette consumers in the future, while BAT and Philip Morris will make use of the global market.

To compensate for these losses, the tobacco giants have expanded their product range in recent years. But who will manage the transformation and continue to generate massive profits in the future?

Philip Morris Int. is probably the most advanced here, already generating ~ 1/3 of its sales with alternative products. The leader here is their heated tobacco product IQOS, which dominates the global market. They bought back the distribution rights for the US market from Altria at the end of 2023. With the acquisition of Swedish Match, Philip Morris Int. bought into the US oral tobacco market, which they now dominate with Zyn. Vapes are negligible here, as the focus is primarily on heated and oral tobacco.

BAT is the world market leader in vapes with VUSE. They are also excellently positioned in the oral tobacco segment with Velo/Lyft, even if they have not yet been able to really gain a foothold in the USA, Velo is showing strong growth worldwide. In the heated tobacco segment, they cannot compete with the dominance of IQOS. BAT's alternative products will become profitable for the first time in 2024.

In order to diversify further, Altria acquired large stakes in JUUL (vapes) and Cronos (cannabis), which are almost total losses. The JUUL shares have since been sold. In order to enter the vape business, Altria acquired NJOY last year, which is not yet on the market. Oral tobacco, which is marketed under the ON! brand, has not been very successful so far. The heated tobacco products will in future be sold in partnership with Japan Tobacco.

It is becoming apparent that Philip Morris Int. will dominate the heated tobacco market and BAT the vape market. These two are also likely to share the global oral tobacco market. Whether and how Altria can maintain its position in the US market is difficult to say. It almost seems as if Altria has slept through the turnaround, especially as they are most affected by the dwindling number of smokers, it is inexplicable to me why it has taken so long. Philip Morris Int's entry into the US market with IQOS and Zyn will also hamper Altria's growth in the long term, as customers are being lured away on a massive scale. For the first time, Altria is in a position where it has no pricing power.

Why I decided in favor of BAT

• Attractive price
• More attractive dividend payout ratio than Altria
• Clear and targeted strategy for the future
• I assume that vapes will prevail against heated tobacco, BAT is the world market leader with VUSE.

Why not Altria

• too much focus on the US market
• too much stagnation
• Dwindling pricing power
• Too many wrong decisions by management

Why not Philip Morris international

• Valued too high
• Too focused on the end of cigarettes
• Don't see heated tobacco as the future of nicotine consumption

Who you choose depends largely on whether you see vapes or heated tobacco as the future of the nicotine industry. In the oral tobacco market, PM and BATS are on a par. But there is something else that is interesting about PM: its health and wellness division could provide a surprise or two in the future.

If PM approaches the 10 P/E ratio, I will consider adding it to my portfolio.

It will be really interesting if far-reaching bans on illegal vapes are enforced, as these are responsible for a huge loss of sales.

In the long term, I can certainly see the possibility of Altria being bought up internationally by Philip Morris or a merger being agreed. Even though the issue was only taken off the table a few years ago, I assume that sooner or later an agreement will have to be reached due to the growing competition between the companies. Should this not be the case, a merger between Altria and Japan Tobacco cannot be ruled out, as both have already joined forces on the heated tobacco product. If the product becomes the primary operating business for both in the future, a merger would be the best solution.

If BAT were to buy back the Russian business, this would certainly mean a leap in sales. This could also provide a major boost to Velo/Lyft sales, as Velo is particularly popular in Eastern European countries.

BAT itself also has an almost 30% stake in ITC. ITC is an Indian conglomerate that also sells cigarettes, among other things. This gives it a share in a rapidly growing market in which the demand for nicotine products is also steadily increasing. India will also be a large potential market for Velo/Lyft in the future.

Imperial Brands $IMB (+0,14%) and the other smaller companies will be bought up sooner or later, as the market is likely to become increasingly concentrated on PM and BAT.

To what extent the legalization of cannabis could be a goldmine is still written in the stars.

Fun fact by the way, Altria is one of the best stocks of all time.

Your opinion on $IMB (+0,14%) ?

What do you think of tobacco stocks?

I also see potential in this market area in the future.

$BATS (+0,49%) writes off over USD 30 billion. The share price plummets for the time being. It could theoretically go down even further. Nevertheless, I took advantage of it and topped up again. I simply couldn't resist. This means that BATS has even overtaken my $IMB (+0,14%) in my portfolio.

The write-down is "non-cash-effective" and the business continues to run as planned. I therefore also expect a dividend increase in the coming year.

Hopefully things will continue 😅

Below you can see me brooding again after work, with a cigarette of course.

P.S.: this is my favourite café, so I had to make the text on the signs unrecognizable. I want to keep it a secret where I spend my time.

As already announced, I am reallocating my IB position to $PM (+1,85%) um.

Dividend yields over the period since 2020 are around 30 percent.