British American Tobacco BATS Stock 2023 Quick Take
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- เผยแพร่เมื่อ 4 มิ.ย. 2024
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They are actually commited to pay down significant portion of their debt - they even decided to stop the share buyback program to allocate the money in lowering their debt burden. Also it's not true that they use all their FCF to pay dividends as you stated in the video. Their 5 year FCF average is 9B (for 2022 it was 9.74B) and divdends take up around 5B. So very comfortable and safe dividend which also allows above mentioned debt lowering. Another thing which is not correct is that they are in dying business - they are heavily investing in 'new category' which is growing in double digits (it's basically oral tobacco, vaping, heated tobacco, etc.). Plus they have pricing power over the legacy part (cigs) of their business and strong portfolio of brands. I respect that you don't like cigarettes and investing in cigarettes but try to be objective since people who respect you could potentially lose trust in you if they see that you are not really doing a good job during your research in specific stocks/companies. It's really obvious you don't know much about BATS/BTI - which is fine - but then why you need to make video about it?
Couldt have said it better myself, this honestly leaves a stain for me on Sven's credibility
You are totally right! I have researched extensively and sentiment is bad, very low PE compared to peers, but 5-8% growth a year, high and safe dividend, many markets so policies dont hurt them that much and dont forget the HIGH SKIN IN THE GAME! New CEO bought many shares right away too. Great capital allocation if you ask me (lowering debt due to the higher interest rates)!
1000% AGREE
Lolll. K
👍🙏
Most of the time I agree with you Sven, but not this time. Revenue and income is growing.
Yeah lot of debt and goodwill but manageable.
High dividend (pay out as well) but also slow and growing.
Not so bad, like a lot of Sin stocks.
The debt is not that crazy -- it's around 4-5 times current free cash flow. The real risk here is that sales and free cash flow margins dry up.
thanks for sharing:-) Just stating my opinion!
You did not even mentioned their reduced risk products. Obviously the transition is unkown, but it is growing 30% per year. Vuse is one of the leaders in that space, BTI also have huge ITC stake, You did not covered reynolds aquisitions ( which explain goodwill) and obviously stock is dirt cheap.
Imo it is not true that a lot of smokers will die and business will die. On streets in Poland I see many young people with smokes ( but rather with e cigarretss than regular one).
uh, heard such stories many times, anything can happen, but...
Sven, why are you always a butthurt in comments when someone points out that you did something wrong? It's clear in this video, that you didn't research well, which is completely fine (goodwill, revenue growth), but why are you so butthurt instead of trying to communicate/ acknowledge it and go on? Everyone who dislike your analysis is hater, toxic or reddit enjoyer. Its just a sad, that you behave like this - just something you should think about when you're presenting yourself.
It is fine, i just share my opinion and usualky stick to it, all the comments just reinforced my thesis
And, i hope for all of you i will be dead wrong!
@@Value-Investing What thesis? That you were wrong? That you didn't check goodwill and called it financial engineering? That you didn't check revenue growth and their new products? I am not saying the BTI is best investment or good investment at all, that's not the point, but thesis that is based on wrong input can´t be ever right. Even if they go bankrupt, your thesis is wrong, because it is not based on reality. Saying that something is bad investment, because you did bad analysis doesn't mean, that you are right if it ends up as a bad investment lol. On the same level as Tesla hypers saying its good investment on their shitty thesis, just the opposite.
BAT also earns a significant portion of ITC in India. This is hardly known and adds significant value.
thanks for sharing!
Amen
I completely disagree with you Sven this time. Emerging markets are not slowing so much tobacco products and here you have one of the most e prevedibile cash flow ever. Basically a bond with a 10% return over time even if they do not grow. People do no stop smoking from one year to another, so se debt is sustainable imho
thanks for sharing!
Unfortunately this could be true. I cannot speak for other contries, but I see what's happening in my own (country). If western nations have pretty much managed to keep cigarettes away from young people, in Romania more and more teenagers start smoking like they used to do a generation or two ago. And this is because of a very ineffective awareness campaign of the dangers of smoking.
@@raduantonescu2519 Anti-smoking campaigns in Italy were present for decades without success. I do not want imagine in emerging markets without any of them. Tobacco is like oil, everyone that say that is dead, but here we are
Well, you're not supposed to buy any stock, let alone dividend stocks at it's peak and lose your capital! It is now you are supposed to DCA into a dividend stock like BAT. But the debt is concerning in this high interest environment if they don't pay it off fast if the terms on them are high %.
And the trend is down only in the developed countries. Lots of growth in the rest of the world where BAT has a strong presence.
thanks for sharing!
Great job, Sven. I love it when you look at the financials😊
Hi Sven, i enjoy your content a lot. What do you think of TotalEnergies - I know are not a big fan of oil, but they seem to stretch across multiple sectors, does the oil cyclicality still apply?
Thanks!
I’m compiling and picking stocks that I’d love to hold on to for a few years before retirement, do you think these stocks would do better over the years? I’d love to retire with at least $2million savings. Now you gotta rely on a pretty good diversification if you must stay green. Currently up 21% and being cautious. Still better deal than letting it sit in savings or checking earning near 5% interest.
Well up at 21% in this present market is impressive. I was wondering if investing in a cumulative ETF during this next decade is a sound investment. Or is it better to invest in a distributing ETF (even considering taxes)?
ETFs are cool. My portfolio is very much diversified so it's not like i have a particular fund i invest in. You should probably copy a licensed person more so one with experience of the past bear markets. I copy a chartered financial analyst Camille Anne Hector Been quite consistent. My portfolio returned $250k in Q4
With only 350k what do expect people to do ? 10 shares of one of those stocks will not get u anywhere. 3 shares of Vanguard ETF give me a break . Forget the past of 10x stocks ! Those free money days are over ! With 350k just buy a ETF like DIVO with a 5% monthly dividend and add what u can each month.
i am envious i've been in the red for too long even before the dip but would like to ask are you giving her your money or the money stays in your account?
I have complete conttol of my account. That's the ideal for copy trading. My account only mirrors her trades in real time.
I have been buying shares for 3 years , any time it goes below $33 USD. Not a big part of my portfolio(1%). The price seems stable over that period, and delivers an 8.5% dividend @ this price. It seems to hit $40+ every year at some point. I wouldn't hold it forever Buffett style, but i have certainly made worse investments. Thanks for all that you do for the investing community.
thanks for sharing±!
Sven may be right from a value perspective, but many investors use tobacco giants as income stock. Depending on when you buy, you're beating the market evermore after 1-2 years of dividend growth. Dividend growth investors look at charts upside down. Stock price declines are good. Workers typically get paid over weeks and months, so you want perpetual down trends for long-term buying opportunities.
The "decline" in smoking is extremely misunderstood; human population growth more than offsets the decline. Surely, you don't think the decline will go on forever. We have nicotinic acetylcholine receptors in our bodies. As mentioned by others, the quitters are buying the non-combustibles instead, and guess who is selling those?
Further, the obesity and diabetes epidemics, mental health crises, etc, indicate that the developed nations are not at all more health conscientious over time. The browning of the west from immigration means far more r-selectedness in the population. They are going to have short lifespans by definition ("fast life strategists"), and they are going to smoke. Their kids will smoke too (because of low parental investment. Again, it's part of the definition). Mentally ill people are also more likely to smoke, and you can check the trends on that if you think your own eyeballs are not enough.
Pricing power being what it is, the giants can raise the price on cigarettes by a penny and wipe out whatever problems they have--as they have done before. But they often lower prices too to prevent low-income addicts from quitting. The sky has been supposedly falling for these sin behemoths for generations. Like judo masters, they turn most of the bad news into some weird and twisted advantage. I hope some of you other investors have found this helpful.
But income in worthlesd with capital loss
It depends when you buy Sven!You just repeat the same thing like a broken record
@@Value-Investing It depends when you buy Sven!You just repeat the same thing like a broken record
Sven, you probably overlooked the fact that BATS bought Reynolds in 2017
What is the significance of that? What is Reynolds?
@@TheBooban Reynolds American is the producer of Newport and Camel cigarettes, the acquisition was a major deal then. It is also the reason why the debt, assets and goodwill exploded in FY 2017, it was not due to financial engineering as the video suggested.
thanks for sharing!
Thank you for analysis! Sven, can you please explain Tyson Foods situation! Thank you very much.
Will do soon
Thank you Sven!
My pleasure!
Thank U 🙏 for covering this 🙏👌
My pleasure 😊
BTI is one of the best stocks to invest now, they have large investment in India, video is a nonsense.
thanks for sharing!
Sven, I respect u (because of your thorough research and well-reasoned opinions) and I followed u here from Seeking Alpha a few years ago.
These quick-takes are beneath u.
I understand u are trying to find your way here on TH-cam, but don't tarnish your Brand.
thanks!
@@Value-Investing U are very welcome. th-cam.com/video/FFJo3KhcZw4/w-d-xo.html
Great video, thanks sven
My pleasure!
Nice video. Can you analyse Embecta, would really like to have your opinion on it. Thanks
I'll check it out
I was looking at british reits, for me the headline numbers start to be attractive.
Thanks for sharing
so an increase in goodwill can be recorded as net income or profit?
If they had an equity stske and buy out the others
What about PostNL crazy up and down with 10% div?
Don't know enough, or don't understand it well...
i've looked a few times but I don't know, some things are like that.
Your screening is very shallow.
Maybe you should incorporate an analysis tool such as fastgraphs or gurufocus to better understand the businesses.
Your netincome-based analysis is simply offputting when you dont adjust earnings nor value the company relative to historic metrics.
Then you Wont make the mistake of thinking CVS is valued as a 22 P/E stock, which made you skip it in an earlier video.
I Think you will do yourself a favor reevaluating this company and CVS.
However i do enjoy the videoes, you are obviously a brilliant mind, but the analysis lacks depth.
Best regards.
thanks for sharing!
Sven, really enjoy the channel, though in this case you clearly have no understanding of the company or the industry. This video should have been 30 minutes, not 3. Yes, the debt will become burdensome if cash flows decline, but why are you presupposing that cash flows will decline? When will they decline and why? For an industry that's in secular decline, why is British American Tobacco (BATS) becoming more profitable? With respect to traditional cigarettes, there are a number of reasons. Although traditional cigarette consumption has declined in most countries as a % of population and on a per cigarette stick basis, the number of tobacco users has not declined significantly in the past decade (1.29 billion users in 2020 v. 1.36 billion users in 2000; Source: WHO global report on trends in prevalence of tobacco use 2000-2025). What’s more, cigarette consumption worldwide has remained stable for a number of years (at ~18% of the global population). The rising popularity of partying and pub culture amongst millennials and working-class communities has especially fueled the demand for flavored and unflavored cigarettes around the world in recent years. Emerging economies such as India and Thailand are also seeing a significant increase in cigarette demand as a result of rising youth populations. Most importantly, cigarettes have an inelastic demand, allowing tobacco companies to continually raise prices to offset declines in cigarette stick volumes and increases in taxation. Due to the addictive nature of cigarettes, consumers are not willing to give up buying a pack of cigarettes if the price increases by a few cents (e.g., my sister-in-law is currently paying >$20/pack in Canada, and isn't intent on quitting anytime soon; there are 100s of people I know with the same story). Moreover, it is extremely difficult for a smoker to suddenly quit smoking, which is why it is unlikely for this market to become unprofitable in the years to come. Overall, the combustible tobacco market is expected to GROW (albeit slowly) over the next decade. In fact, even if we assume that the industry is in secular decline, it appears that a great deal of headroom remains for price increases globally (which would offset volume declines). Morningstar estimates that it will be 2046 before global pricing reaches levels at which price elasticity will take effect. Finally, you need to take into account BATS investments into the new category, non-combustible market. BTI is also well-positioned in the emerging non-combustible, new categories market. Vuze is the # 1 vaping product in developed markets with a 35.9% category share (from 16.2% in 2019). Velo is the # 1 nicotine pouch product in developed markets with a 30.4% category share, and 69% volume share in Europe. glo has a 19.4% category share (from 12.4% in 2020) in developed markets. New category products (including non-combustible vaping products) are expected to grow at a CAGR of 15% (Source: KANTAR Incidence Study and Consumer Survey across Top 42 markets at industry level) into 2030. Some estimates suggest that the e-cigarette and vape market will grow at a CAGR of 30.6% from 2023-2030 (Source: Grand View Research). In my view, the biggest risk for BATS is NOT debt load. BATS has 2.5b short term bonds due 2023; 4.2b in 2024, and 4.4b in 2025; also, average maturity is 10 yrs with a 97:3 fixed:floating ratio; average cost of debt is 4%. These are well-covered by post-dividend cashflows. The biggest risk is that New Category revenues will not fully displace traditional tobacco revenues in the LONG-term (how long? who knows). Or, even if these revenues are replaced, new category products may not turn out to be as profitable as traditional tobacco products, and so margins may be compressed.
I just shared my fucking opinion, why do I need to think like you?
@@Value-Investing Of course you don't. That's not the point. It's not that your conclusion is wrong; it's that your analysis was weak. As I said, there are certainly risks investing in BATS, the biggest (long-term) risk being that New Category revenues will not displace the traditional tobacco business (incidentally, you mention this risk in your second video). I don't own the company myself, though I've become interested in the sector since reading Terry Smith's Fundsmith letters. He's still invested in Philip Morris (as is Tom Russo) and was invested in Imperial Brands and Swedish Match in the past. I'd be interested in what you think about Smith's analysis of the Tobacco sector. He discusses it briefly here: th-cam.com/video/8CaFpDi1BO0/w-d-xo.html. There is certainly risk here, though I don't think the risk-reward is as lopsided as you suggest. A reverse DCF suggests that there is a negative 6-7% free cash flow growth rate priced in over the next 10 years. That seems improbable given that the traditional tobacco revenues are still growing (and expected to grow), and given that BATS is still increasing cash flows at mid-single digits. To be sure, something may drastically go wrong in the next ten years, but that's true of any investment.
Tobacco can keep up with inflation. Walgreens...not so much.
thanks for sharing!
Walgreens seems to be getting cheap.
Revenues are pretty much stagnant. There are litigation issues. And there is an awfully steady gross profit margin decline (from 30% to 20%) over the past decade.
Valuationwise: if you take their 132.7b revenue as of FY22, grow that 2% per year over 5 years, apply a 2.6% profit margin (based on their FY23 adjusted EPS guidance of 4.0; pre-covid average was 3.5%) and assume that 50% of it is distributed as a dividend, applying a terminal multiple of 10 and discounting at 10%, I get $35.
Morningstar's valuation is more rosy ($48) and assumes that profit margins will reclaim 3% and earnings multiple will expand to 12-13, all else equal.
I am not very familiar with the VillageMD and Summit Health ventures that they are investing on, so I cannot tell to what extent those can help boost margins, if at all.
thanks for sharing!
I think at current levels CVS presents a more compelling risk/reward. They also managed to adapt their business model which is far to be the case for wallgreens
Most smokers are in low and middle income countries, actually 80 % says WHO. There is also a hardening effect that is known: lessening smokers becomes harder and harder, because the ones that are left are the most badly addicted. Our society also has become very narcotic positive with increasing cannabis use and stimulant consumption has really exploded. There are all trends that boost nicotine consumption. There are also "new" products with nicotine like E-cig and oral tobacco that boost the use.
I think you would like nicotine consumption to go away. But just think that government is in charge of that. And you what happens when government takes over projects.
thanks for sharing!
The Indian market is growing, and rising prices are keeping sales stable in shrinking markets. As Philip Morris exits classic cigarettes, customers will switch to suppliers that continue to offer them. In addition, there are new markets such as e-cigarettes and cannabis. - Smoking harms health and I advise everyone not to start or quit. Nevertheless, I am invested here, as I was or am also invested in alcohol and cannabis. I have also been invested in gaming, although it is also unhealthy to sit in front of the computer all the time. Everyone has the right to self harm. I draw my moral line at arms and weapons producers, whose products are not produced for self-harm.
thanks for sharing, we all have different reasons for investing or not into something!
I like these quick takes!
At least one :-))
Obviously, many audience members here have good knowledge of BTI.
:-)
Thank you for highlighting the risks. So many ignore them.
Always!
Poor Sven, does a Quick Take and everyone gives out it's not Detailed enough, that would be a Long Take lads. Don't mind them Sven, I bought 53 shares of Rubis this morning, so you are partly responsible for my children's financial future, so that's you, Li Lu, Seth Klarman, Monish Pabrai, Warren and Charlie, maybe even Ted n Todd, they're in good hands! Keep it up, thanks for all the info.
ps in case you're not busy enough with the other billion videos you have planned I'd love to hear someone else's take on Sofina stock, Brussels, probably just about 20% below NAV for a holding company but I like the look of them, they even got a nice bit of Bytedance in their portfolio
Sven these quick takes are useless if you dont even make a proper analysis of a company. Better not to make than liquidate an investment as a good or bad based on 3 minutes analysis. This video is quite superficial
I do what I need to know enough for me and share it!
A dying business that doubled its revenue in the past 10 years. Their vape side of the sale is up by 20% over the years.
on a costly acquisition!
@@Value-Investing I agree, that BAT payed to much for Reynolds.
@@Value-Investingshort term yes, long term not really….
Smoking is one of life's finest pleasures.
:-)
A little too quick of a take maybe, as it is in far better health than Altria, but tricky business nonetheless
just sharing my opinion and sometimes I know enough!
Very superficial analysis
thanks!
I disagree with you Sven. You did not mention the new categories that are growing fast while yes, normal cigarettes are not growing any more but are still stable due to price increases. There is still potential in Asia and Africa to grow. BAT also has huge pricing power; they reduce debt fast and the dividend is easily covered by their cash flows. For me it wasn’t a buy 6 months ago but now ohhh yes!
thanks for sharing!
buffett rule 1 don t lose money buy BAT with a 10 year horizon without increasing the dividend or compounding 90% cash returned in 10 years , just one question to answer will people still be smoking in 10 years ,i say yes, OR mastercard again little competition loads of free cash 0.61% yeild 10 years 6 % dividends leaving 94% risk and i don t understand the business enough to see tech dangers, thats why i like BAT i m not very brainy,if doubling revenue in 5 years is a stable revenue, what is amazon going from profit to loss in 5 years? less stable unstable almost stable lol microsoft have nt doubled revenue in 5 years are they very very unstable
I am really a fan of yours but this was really a poor video, i think you stayed too much on the surface this time.
Thanks, but for me it was enough
Worst researched content ive ever seen from Sven. Wow
will have to discuss again!
I really wonder what kind of value investor you are. I am shocked by your statements. The company is still growing and has a P/E below 8. This is a screaming deal.
looks like its been down for last 5 years, not a good thing
You never know
Sven I advise you to treat Tobacco stocks like Defense stocks: just don't talk about them
well, just giving my take, and I understand well all those invested will not like it but that doesn't mean I shouldn't talk about it!
Tobacco has been a dying business for decades… buybacks, price rises, consolidation and cost savings have still made it one of the best businesses in history…
that is true, but that is also the risk and reward!
You are underestimating the stupidity of human beings. Tobacco companies have a sticky product and a very loyal customer base.
:-)))
I see a lot of shareholder bias in these comments
I think 'a lot' is an understatement :-))))))
Sven is very biased towards tobacco stocks and it shows.
Sven is just sharing his opinion :/))
Not accurate, and very shallow analysis.
Enough for me, will discusd
The US market is going insane and Sven is commenting on the most irrelevant stocks and topics
Haha, good take. 😅
It is not a irrelevant stock. Value investors know sin stocks like BTI. MO, PM. We do not follow the herd and buy what is hot. We look for depressed high quality stocks that people don't pay attention. Buy low sell high. BTI is one of them. There are many more undervalued stocks in health care and REIT sectors since all the attention now is on technology , industry & communication. No FOMO here
@@kurniawanms2) Everything that he discusses recently is a no go.
2) If he focused on value investing, he’d discuss totally different stocks. There are several value bargains in this market away from FOMO. And if there are none according to him, it’s better to say it clearly.
Now, that is a compliment!
@@harrypotcha0283 What good value opportunities do you see right now? Always keen on good advice!
Sven still the top
The second positive comment :-)))
What do you think about Lenzing (AT0000644505)? Austrian textile production company. Stocks fell around 20% after they announced a 400 EUR million fully underwritten capital increase with subscription rights this week. Stock is down about 60% from beginning of 2022.
I looked at it in 2021 when looking at all austrian stocks, but I don't remember what, so it didn't stick!