TheStreet.com Ratings: Altria's Distraction Discount

Tobacco stocks are finally getting some positive surprises, but not all of them are benefiting equally.

Last week, California voters turned away Prop 86, an initiative that would have quadrupled that state's cigarette taxes to the highest level nationwide. With this recent win and the removal of class-action status from a $145 billion industry lawsuit in July, investors now have reason to believe that big tobacco stocks are headed for a big comeback.

These brand-name stocks are gaining popularity in core investment portfolios and with value-buyers. So even if you do not smoke, you should be happy if mutual funds you hold own these stocks. As the chart below shows, most of the stocks in the tobacco group have already posted substantial gains of 25%-40% year to date: Reynolds American(RAI Quote) is up 39%, UST (UST Quote) is up 39%, British American Tobacco (BTI Quote) is up 26% and Carolina Group (CG Quote) is up 43%. The one exception is Altria Group (MO Quote), which has lagged with a 12% year-to-date return as of last Friday. ...