Market Overview

Philip Morris A Staple Play Despite S&P 500 Performance


Philip Morris (NYSE: PM) continues to perform well on Monday as the broad market experiences jitters.

Philip Morris' decision to move its Australian tobacco production plant to Korea to produce its reported 40 billion cigarettes per year will help boost the firm's financial statements.

Not only will the firm cut regulatory costs thanks to the relaxed view the Koreans have on the tobacco industry, which is still growing within their borders, they will also cut employee related costs from their Netherlands factory as 1900+ people are let go completely from the firm.

Philip Morris is moving its manufacturing operation personnel in the Netherlands to more scarcely populated factories they have within Europe.

As the dynamics of the tobacco industry change, Philip Morris should continue to look into expanding its exposure through the smoking cessation market. Advocacy groups and the general increase in readily accessible information available about the hazards of smoking have driven people to create e-cigarettes as a “less-harmful” alternative, though the FDA has yet to speak on the matter.

Firms such as 22nd Century Group, which alters the biological make-up of tobacco plants, may be targets of interest for Philip Morris through product licensing rights for the company to purchase and control.

Philip Morris should market and sell products that serves as less harmful alternatives to users who may very well be trying to quit their other product. This would potentially allow the company to capture revenues from those attempting to walk away from the brand.

As appealing as that may be, what's more probable would be for Philip Morris to shelf the license and remove the cessation product from the market.

With 4.51 percent dividend yield and a customer base that is chemically addicted to the main product, Philip Morris shows why it's a trustworthy staple name to own as protection during periods when they're up 0.57 percent and the S&P 500 is down 1.15 percent.

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