JBL: Fearless Forecasts

Altria (MO Quote) is the best tobacco company in the world. In fact, it is one of the best companies in the world.

Altria has a return on equity of more than 30% and more than $10 billion in operating cash flow. Throw in an almost 4.5% yield and you have a gem of a company.

The obvious problem is current litigation. However, Altria recently won certain key cases. Altria won the Engle case in a Florida appellate court that overturned a $145 billion verdict. They also won the Price "Lights" case in Illinois that would have totaled $10.1 billion. Most importantly, Altria avoided a $280 billion penalty when the Supreme Court refused to hear the civil racketeering case against the company.

Further, there are many that agree with Steve Forbes that the Master Settlement Agreement is a backdoor taxation policy for states, and that this illegality will eventually be overturned. This is a very long shot, but a possibility.

The stock has moved on the current cessation of bad news. It has also moved on a lot of good things happening.

China has agreed to allow the Marlboro Man into the great cigarette smoking country. On my last trip to China I was amazed at the smoke, not from pollution but from the fact that it seemed everyone smoked. In a country the size of China this is big news for Altria.

In May, the company made a 98% acquisition in Sampoerna, a leading Indonesian tobacco business. Altria also acquired Coltabaco, Colombia's largest cigarette maker. Philip Morris International is the real growth unit of Altria.

I believe that with the current successful litigation, Altria will split itself into three companies as shareholders have wanted them to do: the domestic tobacco business, the international tobacco business, Kraft and its 36% stake in SABMiller.

I believe the breakup value of the companies will value the existing single company at more than $100 a share.

Altria is a great stock to buy right here. I have owned shares of Altria for quite some time, and plan on buying more early in 2006 for my retirement account due to the dividend.