Buy Tobacco Stocks On The Pullbacks From Record Highs--Wells Fargo

By Markets MarketWatch Pulse

Buy the stocks of Altria Group Inc. , Reynolds American Inc. and Philip Morris International Inc. on Wednesday's dips, said analyst Bonnie Herzog at Wells Fargo, who said she believes concerns over the potential release of e-cigarette regulations are overdone. "As a reminder, regulation of the e-cig/vapor industry is broadly positive for the big tobacco manufacturers since it will increase the barriers to entry and likely entrench them even further," Herzog wrote in a note to clients. "Keep in mind, even if regs prove restrictive to innovation, this doesn't mean the end of the category, it just means growth could be slower." The stocks of Altria dropped 3% and of Philip Morris slumped 1.4% in afternoon trade, a day after closing at record highs. Shares of Reynolds American, which closed at a record on March 10, shed shed 4.2% Wednesday. She said she remains bullish on the tobacco sector, given the strength in the companies' core businesses, and encourages investors "to take advantage of the weakness and buy the stocks."

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