Group 1 - Manika is a macroeconomist with over 20 years of experience in investment management, stock broking, and investment banking [1] - Manika runs the profile Long Term Tips (LTT), focusing on generational opportunities in the green economy [1] - The investing group Green Growth Giants takes a deeper dive into opportunities presented by the green economy segment [1]

British American Tobacco p.l.c. (NYSE: BTI ) is an international tobacco company that manufactures and sells tobacco products around the world. They have a strong portfolio of products that includes Vapor products, Heated products, Modern Oral products, Traditional Tobacco products, andI believe in fundamental analysis and disciplined market research. I have strong quant background with a Ph.D. (Chemical Engineering, University of California, Santa Barbara) in model predictive control and an MBA (Jones Scho ...

Group 1: Company Overview - British American Tobacco primarily operates as a tobacco company, with approximately 80% of its revenue derived from combustible tobacco products, predominantly cigarettes, which account for about 97% of the volume sold [2] - The addictive nature of nicotine allows British American Tobacco to maintain a steady consumer base, despite the classification of tobacco as a non-essential consumer staple [3] Group 2: Financial Performance - The company offers a high dividend yield of 7.1%, significantly above the broader market average of 1.2% and the consumer staples average of 2.6%, indicating potential risks associated with the investment [1] - In 2024, British American Tobacco's adjusted earnings payout ratio was approximately 66%, suggesting that the dividend is likely to remain safe in the near term [4] Group 3: Market Challenges - British American Tobacco faces a long-term decline in cigarette volumes, with a 5% drop in 2024, following declines of 5.3% in 2023 and 5.1% in 2022 [5] - The U.S. cigarette business experienced a significant volume decline of 10.1% in 2024, mirroring the struggles faced by Altria, which saw a 10.2% decline [6] Group 4: Strategic Considerations - Both British American Tobacco and Altria are attempting to offset volume declines through price increases, but this strategy may not be sustainable in the long run [7] - Investors should closely monitor volume trends in the U.S. market, as continued declines could signal deeper issues, especially if these trends affect the company's international operations [8][9] Group 5: Long-term Outlook - While the dividend appears secure for now, the ongoing decline in the U.S. market poses significant long-term risks, potentially impacting the company's ability to sustain its dividend [10]

Group 1 - The article emphasizes a dividend-focused value investment strategy that prioritizes capital preservation and steady income growth [1] - The investment approach involves holding high-quality value stocks that provide meaningful growth and long-term safety [1] - The author encourages engagement through direct messaging and social media to share insights on financial independence [1] Group 2 - The author has disclosed a beneficial long position in several stocks, indicating a personal investment strategy [2] - The article is presented as a personal opinion and does not involve compensation from companies mentioned [2] - The author clarifies that the content is for informational purposes and does not constitute investment or tax advice [3]

Group 1: Company Overview - British American Tobacco generates approximately 80% of its revenue from combustible products, with cigarettes accounting for 97% of the volume sold [2] - The company is facing a long-term decline in cigarette volumes, which fell by 5% in 2024, following decreases of 5.3% in 2023 and 5.1% in 2022 [4] Group 2: Industry Trends - The number of individuals using only combustible nicotine products in the U.S. has decreased from 34 million in 2019 to 28 million by the end of 2024, indicating a broader trend affecting the cigarette industry [3] - British American Tobacco is attempting to diversify its product offerings by investing in "new categories" such as vaping products, heated products, and pouches, which currently contribute nearly 20% of revenue [5] Group 3: Financial Performance - In 2024, British American Tobacco paid out more in dividends than it earned, resulting in a dividend payout ratio exceeding 100%. However, the adjusted earnings payout ratio stands at 66% [6][7] - The dividend consumed around two-thirds of the company's cash flow in 2024, suggesting that the dividend is sustainable for the time being [7] Group 4: Future Outlook - The new categories are expected to play a crucial role in offsetting declines in the core cigarette business, but they currently contribute only 2% of the company's profit from operations [8] - While the dividend is secure for now, the company faces a long-term challenge in transitioning away from cigarettes, and failure to successfully grow its non-combustible businesses could jeopardize the dividend in the future [9][10]

Core Insights - The individual has a strong interest in financial markets, particularly in fundamental analysis, which evaluates actual company performance rather than stock price movements [1] - The focus is primarily on long-term investments in stocks and ETFs, with a preference for US companies, while also analyzing European and Chinese firms [1] - The banking sector is highlighted as a key area of interest, as it is essential for understanding economic health [1] Investment Approach - The investment strategy is characterized by a contrarian view, indicating a willingness to go against prevailing market trends [1] - The individual emphasizes the importance of macroeconomics in investment decisions, suggesting a holistic approach to market analysis [1]

Group 1 - The article emphasizes the importance of delivering alpha-generating investment ideas through a structured and evidence-based approach [1] - The author adopts a generalist investment strategy, exploring various sectors with perceived alpha potential compared to the S&P 500 [1] - Typical holding periods for investments range from a few quarters to multiple years, indicating a long-term investment perspective [1] Group 2 - The author has disclosed no current positions in the mentioned companies but may initiate a long position in BTI within the next 72 hours [2] - The article reflects the author's personal opinions and is not influenced by any compensation from companies mentioned [2] - There is a note that past performance does not guarantee future results, highlighting the inherent uncertainties in investment [3]

Group 1 - The article discusses the author's significant investment in British American Tobacco (NYSE: BTI), highlighting it as the largest holding in their personal portfolio [1] - The author emphasizes a long-term investment perspective, noting that it has been nearly six months since the last article on BTI was published [1] Group 2 - The author identifies as a seasoned value investor with nearly 20 years of experience, focusing on undervalued companies that provide a margin of safety and attractive dividend yields [2] - The investment strategy includes a global approach without sector or country limitations, concentrating on companies with solid earnings and future growth potential [2] - A specific interest is noted in companies trading at less than 8 times free cash flow, which reflects a disciplined investment philosophy [2]

Group 1 - The tobacco sector represents a significant portion of the author's personal investment portfolio, with a specific focus on Philip Morris (NYSE: PM) which has not been previously analyzed in detail [1] - The author emphasizes the importance of identifying undervalued companies with strong earnings potential, particularly those trading at low multiples of free cash flow, which aligns with a value investment strategy [2]

Core Viewpoint - British American Tobacco (BTI) is facing significant challenges despite its high dividend yield, primarily due to declining cigarette volumes and the long-term viability of its core business [1][11]. Group 1: Business Performance - Cigarettes account for approximately 80% of British American Tobacco's revenue, which raises concerns about the company's future [2]. - The company has experienced consistent declines in cigarette volumes, with a 5% drop in 2024, 5.3% in 2023, and 5.1% in 2022, indicating a non-growing business [3]. - Despite the declining volumes, British American Tobacco has been able to maintain and even increase its dividend payments, leveraging price increases to offset volume losses [6]. Group 2: Dividend Strategy - British American Tobacco is using the reliable demand for cigarettes to implement price increases, which helps sustain its high dividend yield [5][6]. - The company's strategy appears to be focused on attracting dividend investors, even as it acknowledges the challenges facing its cigarette business [6][10]. Group 3: Valuation Concerns - The high dividend yield may mislead investors into thinking the stock is undervalued, but traditional valuation metrics like price-to-sales and price-to-book ratios suggest that British American Tobacco is expensive [8][9]. - A significant one-time charge in 2023 related to the accounting for its U.S. cigarette business has further complicated the earnings trend, making it less reliable for valuation [9][10]. - The long-term outlook for British American Tobacco is troubling, as the company may struggle to replace its declining cigarette business with new ventures [11].