Even as financial misery looms, or perhaps because of it, people need their vices. Cigarettes become a necessity for the trader in a bear market, and tobacco becomes a strong play in an economic downturn.

And so the recent near-15% dip in share price for defensive bellwether

Philip Morris

(MO) - Get Report

is providing a strong buying opportunity, according to a note put out this morning by Merrill Lynch analyst

Sandhya Raju

. In the past year, as the market has tumbled from its highs, MO has posted remarkable 118% one-year gains.

The note cites several factors that have contributed to the recent decline. But Raju thinks the stock has been unduly beaten-down. "Technical analysis notwithstanding, we offer evidence as to why the market has overreacted to all this and why Philip Morris is still a compelling investment opportunity," writes the analyst.

The stock's dropoff is "mostly due to profit taking," asserts Raju, but he cites ancillary motivations for the selling as well. The biggest concern on the news front is the company's filing for a spinoff IPO of its

Kraft

unit, a food segment of

Nabisco

, which Philip Morris recently acquired. While Kraft will be one of the biggest IPOs in U.S. history, nearing $5 billion in common stock, cost savings figures from the IPO have fallen short of expectations. Raju believes this was already factored into the stock's price, however.

The new round of litigation that is beginning against Big Tobacco and Tuesday's interest rate cut have also played a role in the stock's decline. The analyst believes investors' response was overdone. Writes Raju: "Tobacco stocks outperform while the Fed is cutting interest rates. It's only after the Fed is 'done', i.e. the economy has shown evidence it is back on track, that tobacco stocks perform in line or underperform the market." And as it looks now, the Fed is not done, and the economy is far from being back on track.

Raju opines in the note, "The MO fundamental story is very much intact and the more inexpensive valuations afford a good buying opportunity." Smoke, anyone?