Investment Idea - Altria (MO) Attractively Valued

Investment Idea - Altria (MO) Attractively Valued as a greater than recent decline in cigarette volumes (6% vs 3% average over last 12 years), JUUL vaping issues (35% owned by MO) and uncertainty regarding MO-PM merger have pushed MO to a valuation of 10 times Forward P/E and less than 12 times EBIDTA.

In 2017 when consumer staples as a sector was in favor MO was valued at 22 times P/E. Things have changed a lot in the last 24 months as consumer staples as a sector is out of favor and headline risk around vaping health issues and risks of US FDA regulatory changes have investors on edge. Some MO investors are also worried about a dividend cut if merger with PM closes.

It is not an investment without risk but selling MO puts looks attractive with Jan 2021 $50 puts possibly providing $13.50 premium. A case can be made for MO fair value to be $55 which is 32% above today's share price of $41.5.

CDC Report 2017 - Current Cigarette Smoking Among Adults in the United States