Absolutely. It is my second largest holding at 7.5%
It brings defensive characteristics to the portfolio and depressed expectations at starting point brought increased gains in times of economic uncertainty and turmoil. Furthermore, the business naturally mean reverted and we’ve made a very good gain in a fairly short period.
Globally, over the many decades, selling cigarettes has been such a good business and produced so much cashflow that management has always mis-allocated capital, but always been bailed out by the cigarette cash machines.
Philip Morris/Altria has owned what is modern day Kraft Heinz and even today holds a stake in Anheuser In Bev. I think shareholders would’ve been better off if all that money was returned.
ITC has actually done super well in diversifying, all things considered and in comparison to global Tobacco peers.
They did have a stint in a financial services business as well in the 90s which was a dud. Due to some business diversification, top brass at ITC was arrested for some FERA violations in 1996. The prodigious tobacco cashflow allows you to make up for A LOT of mistakes.
My base case is that it doesn’t happen at all.
And if it does, probably takes 2-3 years to wrap up.
It was my attempt to outline a scenario that unlocks the most value for shareholders.
All I can do is dream of optimal capital allocation and value creation.
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