BTAFF - Tidefall Capital - British American Tobacco: Success Against Illegal Chinese Vapes Would Immediately Be A Major Tailwind

2024-05-17 09:10:00 ET

Summary

• We recently took a position in British American Tobacco.
• This bull thesis of raising prices to more than offset volumes has long been understood by investors.
• We believe that the market is missing the potential for the removal of illegal vape devices in BAT’s key US market.
• Any sustained enforcement success against illegal Chinese vapes would immediately turn a major headwind into a tailwind and potentially re-rate BAT’s PE multiple.

The following segment was excerpted from this fund letter.

British American Tobacco ( BTI )

We recently took a position in British American Tobacco, a global tobacco company with 46% of its revenue from the US. Despite increasingly moving away from traditional cigarettes (83% of revenue) and a transition to smokeless products (17% of revenue, with a goal of 50% by 2035) , the company has been abandoned by many active managers and passive funds due to an assumed terminal decline and ESG mandates. However, even under this backdrop of falling cigarette volumes, revenues and profits have steadily increased due to higher prices as customers have limited price sensitivity....

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