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Today's big stories

British American Tobacco gave an upbeat forecast for the rest of the year, as a record number of people flocked to its vaping products
The S&P 500 has a little-known sibling, and it’s been outperforming its older brother for the last two decades – Read Now
Stock picking funds are having an incredible start to the year

Puff Piece

What’s Going On Here?

British American Tobacco (BAT) announced an upbeat forecast for the rest of the year on Tuesday, and investors were left breathless.

What Does This Mean?

If you think you’ve been seeing more longboard-riding startup execs leaving trails of vape smoke in their wake, you’re not imagining it: BAT added a record 1.4 million new customers of its “non-burning products” last quarter, bringing the total to 15 million (tweet this). And of all its brands, Vuse has been the standout: the vaping mainstay now boasts a market share of more than 30% in five of the world’s biggest vaping markets.

The upbeat results encouraged BAT to bump up its sales growth forecast for the rest of the year, but it left its profit forecast where it was. That might be because the company’s investing heavily in its non-burning products business in an effort to grow sales, and it’s admitted that the segment won’t become profitable till 2025.

Why Should I Care?

The bigger picture: Smoking’s not cool anymore.
Tobacco stocks have been feeling the heat lately, partly because traditional cigarette businesses – which still make up the bulk of their sales – are increasingly at risk of tighter regulation. And it’s true that smoking rates have been falling around the world, with cigarette sales expected to fall by 3% this year. Not everywhere, mind you: Pakistan, Bangladesh, and Vietnam all have flimsier anti-smoking rules, which might be why BAT singled them out on Tuesday as key areas for growth.

For markets: Nice-to-haves are out, must-haves are in.
Then again, one investment research group thinks now might actually be the perfect time to buy tobacco stocks. See, the economic recovery is transitioning from “early-cycle” to “mid-cycle”. That’s when growth rates start to peak, and when consumer staples stocks – like tobacco – should outperform consumer discretionary stocks, like fashion. That’s down to their more stable earnings potential, and, as an added bonus, how much cheaper they currently look.

You might also like: A better way to protect your portfolio.

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2. Analyst Take

The S&P Is Being Upstaged By Its Little Brother

What’s Going On Here?

Sure, you probably already know that the S&P 500 gives you broad exposure to the US stock market.

But what you might not know is that the index has a much less famous sibling – one that’s generated almost double the returns over the past two decades.

Seriously: $100 invested into a fund tracking the S&P 500 on the last day of 1999 would be worth $287 today. The same sum invested into its brother would be worth $539 – 88% more.

So that’s today’s Insight: the index that’s generated twice the returns of the S&P 500, and how best to profit from it.

Read or listen to the Insight here

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