Altria Appears Undervalued but Market Concentration Increases Fat Tail Risk

Altria is the leading tobacco manufacturer in the United States. In fact, with Philip Morris International owning the international rights to Marlboro, the U.S. is currently Altria's only market, resulting in more concentrated regulatory risk than for the other major tobacco players, which are multinational. We think it is logical, in the face of that risk, that Altria is pursuing a multiprong approach to cigarette substitutes, even though we harbor doubts about the long-term profitability of some of the emerging categories.