Intro

Welcome to Episode 13 of the Preferred Shares Podcast.

We interviewed our friend and special guest, Rae Maile. Rae is a veteran analyst who has covered the tobacco industry for over 35 years. He has never held back his strong opinions, and always has the data to support them.

In this episode

Rae’s background in financial services, from junior analyst covering brewers and general retail to financials and tobacco

How the tobacco industry has changed and stayed the same

The perpetual lack of confidence about the tobacco industry - both from external analysts as well as industry executives

Population growth’s ‘denominator effect’ within price versus volume

Next-gen nicotine products in the industry landscape

Global demand for nicotine rising

Differences across markets and categories concerning barriers to entry, regulation, and adoption

The anti-smoking lobby’s morphing into anti-nicotine

Taxation, prohibition, and illicit trade

Moral zealotry battling against the individual’s choice

ESG-based investing and idle threats

Over the last century, tobacco is the only industry that hasn’t had a negative 10-year period. What makes the industry so special?

Should tobacco be placed next to other CPGs, or is it in a separate league?

When it comes to tobacco, why do so many analysts obsess over volumes and disregard other critical variables?

What distinguishes a great analyst? Skills needed and the psychology of markets

Rae’s unique writing style. Finding your voice and filling your role

Lessons from Marlboro Friday and price laddering models

The UK market post-Brexit

Perpetual pessimism versus share repurchase programs, dividends versus share repurchases, and capital allocation frameworks

The industry’s history of poor diversification efforts

Surrendering to the science, forgetting the consumer

Episode Resources

Lucy Page Gaston, founder of the Anti-Cigarette League of America

Sir Martin Faulkner Broughton, previous Finance Director, CEO, and Chairman of BAT

“PHILIP MORRIS AGREES TO BUY GENERAL FOODS”, Chicago Tribute, Sept. 1985.

Additional Reading

Curious to see what else we’ve been working on? Below are some pieces we’ve written independently that we think you’d like:

Discussing Going Down Tobacco Road with Gene Hoots, Lawrence Hamtil (Fortune Financial) published September, 2020

Assessing Altria and Tobacco Fundamentals Five Years After the Peak, Lawrence Hamtil (Fortune Financial) published March, 2023

The New Era of Nicotine, Devin LaSarre (Invariant) published July, 2022

Imperial Brands: Looking Through the Noise, Devin LaSarre (Invariant) published October, 2023

Altria: Back to the Race, Devin LaSarre (Invariant) published August, 2024

Philip Morris International: More More More, Devin LaSarre (Invariant) published February, 2024

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Disclaimer

All opinions expressed by Preferred Shares hosts and guests are solely their own opinions and do not reflect the opinions of their respective employers. This podcast is for informational and entertainment purposes only and should not be relied upon as a basis for investment decisions. None of the information contained in the podcast or this web site constitutes a recommendation that any particular security, portfolio of securities, transaction, or investment strategy is suitable for any specific person.

Clients of Andvari and Fortune Financial may maintain positions in the securities discussed in this podcast. Furthermore, from time to time, the Hosts may hold positions or other interests in securities mentioned in the Podcast and may trade for their own accounts based on the information presented. The Hosts may also take positions inconsistent with the views expressed in its messages on the Podcast.

This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit www.preferredsharespodcast.com