Despite proposed tax hikes and numerous anti-smoking campaigns that have seen cigarette use decline in the US, it appears that investors are snapping up tobacco shares.
California’s proposal to triple the tax on a single pack of cigarettes has garnered strong support among voters. Colorado, Missouri and North Dakota have made similar proposals.
Generally, cigarette use among Americans has declined over the last few decades, with statistics indicating that around one in five adults are smokers.
But the cigarette volume has declined recently and tobacco stocks, which are known for their profitability and prosperity, have attracted interest from investors.
US tobacco companies Altria Group and Reynolds American have seen their shares go up by more than 13% in the last year. And Philip Morris International shares are up by well over 20%.
Data from the Euromonitor have shown that total tobacco sales in the US last year were a 3.6% increase from the previous year, ending years of consecutive declines. Interestingly, the cigarette sales in the US are growing faster than the sales of food.
If California’s proposal, named California Proposition 56 is successful, taxes on cigarettes would rise $2 per pack.
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