by Ian Harvey
IMPORTANT NOTE: There is no stop-loss or pre-determined sell price recommended – this is left to the discretion of the individual trader.
Wednesday, September 30, 2015
Altria Group Inc (NYSE:MO) Calls
**OPTION TRADE: Buy the MO Oct 2015 54.500 call (MO151016C00054500) at approximately $0.90. Sell price is left to your own judgment.
Altria Group Inc (NYSE: MO), a holding company with reportable segments comprising smokeless and smokeable products as well as wine, is technical set to move higher through the identification of a head and shoulders bottom pattern on a chart of the stock. A bullish wedge is also present.
Seven years ago, Altria spun off Philip Morris International (PM), splitting the tobacco empire in two, with Altria retaining the domestic business, whilst PMI moved abroad; PMI would concentrate on expanding into higher growth markets, while Altria cut costs, dealt with lawsuits, and raised prices to maximize profits from a shrinking market of American smokers.
That strategy initially worked, but Altria and PMI's positions have since reversed. With most of its legal troubles now in the rearview mirror, Altria is now the stronger of the two, thanks to a robust U.S. economy, low gas prices, and plenty of room to raise prices. Its bottom line, which consists entirely of American profits, is also protected from the strong dollar.
There are two indications that make Altria appealing:-
1. The first is momentum – stocks which have beaten the market over the past 52 weeks generally do so over the following year. Buying stocks that are at 52 week highs is a valid back-tested strategy based on anchoring bias from investors.
Shares in Altria have achieved this by 14.40% year to date and are now trading -2.08% below their 52-week high.
2. Return On Assets or ROA is an indicator of how profitable a company is relative to its total assets. In the last 12 months, Altria Group Inc generated 15.66% using assets of the company. Reuters provide figures showing that industry’s suggest 34.85% and broadly in sector 28.54% seems favorable.
There are seven research analysts that have rated the stock with a a buy rating or a strong buy rating. The company has a consensus rating of “Buy” and an average price target of $59.50.
Cowen and Company reissued a “buy” rating on shares of Altria Group in a research note on Wednesday, September 16th. Vetr upgraded Altria Group from a “buy” rating to a “strong-buy” rating and set a $58.49 price objective on the stock in a report on Tuesday, September 1st. Nomura raised their target price on Altria Group from $61.00 to $63.00 and gave the company a “buy” rating in a report on Thursday, August 6th.