British American Tobacco: Fighting An Uphill Battle (Archive)

This 5-Minute Pitch was originally published on Seeking Alpha before the launch of the Hunting Alphas website. It is shared here to showcase my previous work and track record. New 5-Minute Pitches published on this site will not be disseminated anywhere else.

Elevator Pitch

• After a brief pause in which British American Tobacco performed largely in-line with the S&P500, I believe the stock is due to lag behind again.
• In the H1 FY24 Pre-Close update, management attributed a host of macroeconomic variables to explain weaker than expected performance in the largest segment of US Combustibles.
• I think these explanations distract and fail to focus on the root drivers; a secular decline due to changing consumer habits and loss of market share within the sector.
• It looks like the FDA is trying a bit harder to counter illicit vapes supply, which proliferate more than 60% of the market. But I believe this is an uphill battle that is hard to win.
• There is no meaningful catalyst to stop the bleed of alpha erosion in BTI and I'd rather not fight the bearish trend. For income-focused investors, it would be wise to monitor for capital and total return erosion.

Read the full article here.