Imperial Brands 🚬☠️- IMB

Stock Discussions
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Thanks @josh7 for sharing your views too :slight_smile:

My post was less about the personal freedom of smokers to choose to smoke (and the right of any individual, organisation or government to impose their point of view on that choice) and more that I feel (just my opinion) that when evaluating companies for investment we shouldn’t base our decision purely on profits / revenue / stock performance (historical, current and future) and also look at the various bottom lines beyond that. At best is a company positively contributing to the (health / financial / emotional / security etc) wellbeing of individuals, communities and the environment? Or at worst, is it not negatively impacting it? According to the World Health Organisation "Every year, more than 8 million people die from tobacco use. […] Tobacco can also be deadly for non-smokers. Second-hand smoke exposure has also been implicated in adverse health outcomes, causing 1.2 million deaths annually. Nearly half of all children breathe air polluted by tobacco smoke and 65 000 children die each year due to illnesses related to second-hand smoke. Smoking while pregnant can lead to several life-long health conditions for babies." Tobacco Reading that from the United Nations agency responsible for international public health, to me puts the tobacco industry firmly on the side of negatively impacting individual and community wellbeing.

What I missed out from the quote above is this: “Most tobacco-related deaths occur in low- and middle-income countries, which are often targets of intensive tobacco industry interference and marketing.” while the CDC (leading national public health institute in the US) say “Cigarette smoking disproportionately affects the health of people with low SES (socio-economic status). Lower income cigarette smokers suffer more from diseases caused by smoking than do smokers with higher incomes.” https://www.cdc.gov/tobacco/disparities/low-ses/index.htm As a community of investors, isn’t it our responsibility to at best redress (or at worst not contribute to reinforcing) societal imbalances caused by poverty?

If IMB were serious about helping people stop tobacco use, rather than also profiting from less harmful alternatives, wouldn’t they just stop selling cigarettes and other nicotine containing substances? Couldn’t they fund programs that actively increase health, decrease stress, improve social connections etc like grass-roots sports programs or healthy eating initiatives?

You make a good point about there being tools to help people stop smoking. Yes, there are tools, services and organizations to help people do that. In my view, they’re seriously underfunded compared to what is spent on helping people quit (not to mention the fact that they wouldn’t be needed at all, if tobacco products weren’t available on the market). Full disclosure, I couldn’t find great stats on this, but in 2016 (the last year for which stats seem to be available) “cigarette and smokeless tobacco companies spent $9.5 billion on advertising and promotional expenses in the United States alone.” Tobacco Industry Marketing | CDC That’s an unbelievable amount, not to mention the millions spend on lobbying companies and individuals to influence governmental policy around the world.

Like you (as it sounds like), I believe people should have the right to live, think and love as they want (as long as it doesn’t harm others). I do think though that as investors, we have a responsibility to evaluate companies carefully in terms of what they add to society and what they take away. Just because something is legal doesn’t mean it’s good. Likewise, just because we can make money by investing in a company or sector, doesn’t mean we should.

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You’ve obviously done your research and are much more informed in this area than me so I don’t have much of a counter-argument. Apologies if you were expecting one :stuck_out_tongue_closed_eyes:.

The only thing I will comment on is this bit;

I don’t think it’s IMBs responsibility to do any of these things. At the end of the day they are a business and while all those things you suggested would be great to have, they don’t sound very profitable. I don’t know of many businesses that fund things like that unless it’s for publicity.
I can’t even imagine how many hundreds of millions McDonalds had to spend to become the ‘official restaurant’ of the London Olympics back in 2012 but I’m sure that money would have been better used to fund gyms and the like. (A bit of a weak comparison but hope you get what I’m saying)

All that being said, I do think the tobacco market is dying out as younger people become more informed and don’t take up smoking but there is still money to be made and if I/we don’t invest, there’s always going to be someone else who will.

If it makes you feel any better, I’m planning on cutting back my IMB investment by about 70% over the next year or two to reduce the amount of holdings I have in that industry. :laughing: I also have some holdings in gambling stocks so I’m defo not a very ‘ethical’ investor, sorry :wink:.

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I invest in all the ‘vice stocks’, eg tobacco, alcohol and gambling.

Everyone knows that none of the above are good for you yet there will always be people who do the opposite of what they are told to do for their own good (see being told to stay at home, etc…)

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You make indeed a really good point.

However, in really few word my point is: in a perfect world we would base our investment decision not only on profit but also on the impact that the company has on the environment, people,etc.

But unfortunately (only my view here) we do not live in a perfect world. And I get your point of the responsibility that as investor we should aim to help ethical companies to succeed. This would be make the equities world much narrower and limit your exposure to index fund.

I am not an expert but I think the majority of the companies listed in the ftse 100 or s&p 500 are not so ethical.

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I tend to err on the side of people being responsible for their own choices. If people want to give up smoking, then IMB will go out of business and that would just be the natural progression of things, if people want to smoke, IMB provides, same as fast food, energy drinks and all the other unhealthy parts of life. IMO all a company is responsible for is selling it’s product in an honest way (eg, not lying/covering things up). If they want to do more, awesome, more power to them, but I don’t think they are obliged to.
Every time I buy a pack of tobacco, I have made the choice to do that, and not to give it up. No one is responsible for that other than me.

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22

Thanks for your response. Always great to talk these things through and hear different sides of the debate. I know that everyone must examine their own conscience and make decisions based on what’s important to them, but personally I applaud your decision to deprioritise tobacco industry investment.

You raise an interesting point about the tobacco market dying out - in wealthier nations that’s true, but in poorer societies less so. That’s why the tobacco industry has been investing so heavily in the cannabis sector (plus vaping as you mentioned earlier) to offset the decline in traditional cigarette / cigar / pipe tobacco sales.

It’s funny that you mention the gambling sector - you won’t be surprised to know that I also wouldn’t invest in this sector. I don’t have an issue with social gambling where people can afford to lose the money they play with and gambling is ‘fun’, but I think there are few, effective safeguards to stop people gambling more than they can afford to lose, and as I believe problem gambling is an addiction, I don’t think it’s fair to expect a gambler to stop themselves before or once it’s become a problem. Then the personal, family and community ramifications of debt are a real issue and often affect more people (often the immediate family) than just the gambler themselves.

Good luck with your investing and I hope you’re successful.

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The world isn’t perfect as you say, but I do believe we can make it better. What’s not to stop us basing our investment decision not only on profit but also on personal, societal, environment impact etc? Part of what the impact of COVID-19 is reminding us (I believe), along with the climate crisis, is that we can’t continue to pursue growth for growth’s sake and encourage rampant consumption without considering the impact on those around us. We all have personal agency to be part of the solution as well as part of the problem. Just my personal opinion I know, but investing in companies who don’t do enough to counter the negative impact they have, is a great place to start making a change. There are loads of stocks and etf’s that could be considered ethical, for example the Vanguard ESGV etf Product Details | Vanguard Advisors which screens companies for their ethical, social and governance criteria. They exclude ‘stocks of certain companies involved in adult entertainment, alcohol, tobacco, weapons, fossil fuels, gambling, and nuclear power.’ Coming soon hopefully to freetrade! Vanguard ESG U.S. Stock ETF (ESGV) . The fund invests in many companies worth of consideration for individual stock investing like Microsoft / Apple / Visa.

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You make a great point but I would also urge you to consider the impact of marketing (and the huge amounts that companies spend on it) in guiding our ‘free choice’. Broadly speaking, if marketing wasn’t effective in driving behaviour (i.e. your decision to buy a pack of tobacco and smoke it), companies wouldn’t invest heavily in it, and they wouldn’t invest heavily if they didn’t think it would encourage us to buy more of their product or service.

If you have the time here’s a great overview of UK tobacco advertising from Ash
http://ash.org.uk/wp-content/uploads/2019/02/Tobacco-Advertising-and-Promotion-download.pdf Some useful insights include:

In a British television documentary made in 1988, Fritz Gahagan, a former marketing consultant for big tobacco, provided insight into the fundamental paradox faced by the industry: “The problem is how do you sell death? How do you sell a poison that kills 350,000 people per year, a 1,000 people a day? You do it with the great open spaces … the mountains, the open places, the lakes coming up to the shore. They do it with healthy young people. They do it with athletes. How could a whiff of a cigarette be of any harm in a situation like that? It couldn’t be - there’s too much fresh air, too much health - too much absolute exuding of youth and vitality - that’s the way they do it” The marketing of tobacco has been a key factor in driving the global tobacco epidemic: recruiting new, young smokers and positioning smoking not as something deadly but something aspirational. This successful strategy has facilitated the creation of a massive global tobacco market over the last century.

…and…

There is a long-standing, well established relationship between tobacco advertising and consumption. A UK Government commission review of the evidence conducted as early as 1992 found that “The balance of evidence supports the conclusion that advertising does have a positive impact on consumption.” The same review also found that in countries that had banned tobacco advertising the ban “was followed by a fall in smoking on a scale which cannot reasonably be attributed to other factors." … There is extensive evidence that children and young people are highly receptive to tobacco advertising and that young people exposed to tobacco advertising and promotion are more likely to take up smoking.

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If you really want to go down the ethical route, you wouldn’t go anywhere near Vanguard then as Vanguard’s executives in the US have been voting to prevent the directors of big oil companies such as Exxon, Dominion and Duke from facing accountability on climate: Vanguard refuses to sign up to climate crisis commitment | Climate crisis | The Guardian

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26

Sure, marketing works, but as adults we have to be responsible for our own actions. No marketing people are holding guns to peoples heads forcing them to smoke. I get fooled my marketing as much as anyone but that’s on me to be smarter.

That said, I don’t like any form of advertising aimed directly at children.

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Very interesting! I hadn’t seen that - thanks for sharing. Vanguard’s chief exec Tim Buckley’s position seems to be that they believe in ‘engaging’ with companies rather than voting for action. “We have to make sure we’re talking to companies on how they are dealing with and addressing these issues, but not crossing the line and telling them what to do.” I think that’s not a strong enough position and hopefully it’s just a matter of time before they change their stance. As we’ve said above, no-one / company / industry is perfect but some are better than others for sure.

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After todays dividend reduction has anybody changed their feelings on this company? Having read through the recent reports, I have little confidence that this will ever go back up and is far more likley to keep going down.

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IMB Next Generation Products strategy:

Through our expanding NGP portfolio we are providing adult smokers with a range of potentially less harmful alternatives to cigarettes.

We create value through two distinct business growth models, our Market Repeatable Model for tobacco and our Brand Adoption Model for NGP. Consistently applying these models to the right markets and the right brands is key for delivering quality growth. Our high operating margins drive the strong cash flows that are a hallmark of our business and although investment in NGP may initially dilute these margins we expect to see profitability improve over time.

https://www.imperialbrandsplc.com/about-us/our-strategy.html

…Sound of brakes screeching…

NGP revenue fell 43 per cent at constant currency reflecting a reduction in inventories in the supply chain, the impact of the US FDA announcement banning flavoured pods and category declines as health concerns with vaping products in the US and the contagion of these announcements on key European markets.
https://www.investegate.co.uk/imperial-brands-plc--imb-/rns/half-year-report/202005190700023186N/

as a result:

Right-sized our NGP investment

which is corporate lingo for “giving up on” NGP.

Tobacco it is then…

Tobacco volumes fell 0.5 per cent, against an overall market size decline of 4.3 per cent.

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30

Solid overview! This release confirmed my lack of confidence in the business long term

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Take on IMB from Freetrade

Sidebar:

I like the new look of the blog area but the font is a bit small and there’s random paragraphs with blank lines in the content:

Screenshot

Screenshot_2020-11-18 Up in smoke
Screenshot_2020-11-18 Up in smoke1440×6198 1.46 MB

The progress bar at the bottom of the page of the post is a good touch. Can you tether it to the content area for the blog instead of the whole page?

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34

In this video I analyse Imperial Brands stock using fundamental analysis. Is IMB stock a buy?

I go through Imperial Brands’ business summary, sales breakdown & financial statements to get an understanding of the business. After this, I go through my analysis checklist and then value Imperial Brands stock using the discounted free cashflow method.

Imperial Brands plc, is a British multinational tobacco company headquartered in Bristol, England. It is the world’s fourth-largest international cigarette company measured by market share after Philip Morris International, British American Tobacco, and Japan Tobacco, and the world’s largest producer of fine-cut tobacco and tobacco papers.

Imperial Brands produces over 320 billion cigarettes per year, has 51 factories worldwide, and its products are sold in over 160 countries. Its brands include Davidoff, West, Gauloises Blondes, Montecristo, Golden Virginia (the world’s best-selling hand rolling tobacco), Drum (the world’s second-largest-selling fine-cut tobacco), and Rizla (the world’s best-selling rolling paper).

Please also remember to like and comment, if you enjoyed the video!

Subscribe to Lewis Harding Invest on YouTube.

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Brought this years ago. Getting something close to 10% dividend yield on my original investment. It’s like 8% at current prices. Wanted to share it because UK equities get overlooked but they can be the green beacon of hope. Or in other words, the rest of my Portfolio is rather red.

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36

Good stuff. I’m up 22% and thought I was doing well! Always good to see the big dividends too, especially the more weighted ones in December and March.

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