2024-07-10 05:10:16 ET
Summary
- My last article on BTI focused on its high yield and safety of its dividends.
- In this article, I want to provide a more holistic assessment of the stock, incorporating the key information in its 2024 H1 trading update.
- The analysis follows the framework developed by Ben Graham on selecting defensive stocks, a very fitting framework for a tobacco business.
- You will see that BTI checks off all the criteria that Graham listed and is currently priced at a large discount from the Graham P/E.
BTI stock and Graham’s wisdom on defensive stocks
My last article on British American Tobacco ( BTI ) (BTAFF) was published a bit more than 3 months ago on April 4, 2024. At that time, I rated the stock as a strong buy. The stock price was $29.67, translating into a yield of 10% and a P/E ratio of only 6x. I argued that this is a good opportunity based on the following considerations:
BTI's absurdly high yield and low P/E suggest either a dividend cut or permanent stagnation. But I see the exact opposite scenario. I see robust cash flow, strong financial strength, terrific profitability, and healthy growth potential. It is thus a compelling opportunity for contrarian investors.
Read the full article on Seeking Alpha
For further details see:
British American Tobacco: Let's Ask Benjamin Graham