SOURCE: Rothman Research

Rothman Research

April 05, 2010 08:54 ET

The Tobacco Industry -- to Quit or Not to Quit

JOHANNESBURG, SOUTH AFRICA--(Marketwire - April 5, 2010) -  www.rothmanresearch.com - It would seem that the tobacco industry will forever have to live in defensive mode with the latest mud-slash coming from a review on the effect of menthol cigarettes. When President Obama signed the Family Smoking Prevention & Tobacco Act in 2009, one of the many restrictions imposed by this law on tobacco manufacturers was the use of any chemical additions, aromatic plants, ingredients or spicy flavors that gives a 'typified gusto' to cigarettes, making them more appealing and 'arguably' more addictive; the focus being on minors.

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However, this restriction exempted menthol cigarettes, and this is now under fire as anti-smoking activists are on the war path with a vengeance. Matters are now in the U.S. FDA's courtyard as they start a year-long investigation to determine if minty flavor makes smoking even more addictive. But this promises to be a passionate battle-of-wits as major cigarette producers like Altria Group Inc. (NYSE: MO) are going all-in to ensure that they do not lose a local market of over 19 million end-users. Direct & free downloadable report on Altria Group Inc. is on hand by signing up now at http://www.rothmanresearch.com/article/mo/23381/Apr-05-2010.html

"The challenges are great for cigarettes producers. If you follow the logic behind the flavoring restriction under the 2009 law, menthol cigarettes is clearly a fit... but on an economic stand point menthol cigarettes make about 27 percent of the whole tobacco market, which is a $70 billion market, and this is a huge factor that cannot simply be neglected. If after the FDA's review a ban is imposed on menthol cigarettes, this would be yet another blow to the tobacco industry since the mid-1990s, but one that I believe the industry will absorb with a bit of an indigestion even if you might see a few key players like Lorillard on the brink," commented Mathew Collier of www.rothmanresearch.com. "On an investor's perspective, however, the tobacco companies have always been a good bet as these are conventional stocks with well-built margins and a sinful hardiness towards beaten economic environment. If you consider Star Scientific (NASDAQ: CIGX) as an instance, its share price has surged by nearly 300% since late 2009."

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The ultra-conservative members of society have labeled the tobacco industry as 'sinful,' and yet as with Las Vegas, Sin City by excellence, it never stop attracting investors who seem to entertain a paradox-affiliation with stocks trading in this space. Many of the industry giants have a bewildering flair for cash and have generously rewarded investors with huge returns on investments. So, the question concerning the future of the tobacco industry stands to reason much like my last 10 New Years' resolutions -- to quit or not to quit. Read our reports upon free registration at http://www.rothmanresearch.com/index.php?id=6&name=Register to have an insight.

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