NEW YORK (TheStreet) - Although the tobacco industry is undergoing a transformation with smokeless tobacco and e-cigarettes, the segment is still booming. And while cigarette sales are down in volume, they are still the bulk of revenues. Still, e-cigarette and smokeless tobacco sales are increasing in volume.
Yet, as always, big tobacco has its challenges. The latest is that Hawaii has just raised the minimum age requirement for cigarette buyers to 21 from 18.
So, what are the best tobacco companies investors should be buying? Here are the top four, according to TheStreet Ratings,TheStreet's proprietary ratings tool.
TheStreet Ratings projects a stock's total return potential over a 12-month period including both price appreciation and dividends. Based on 32 major data points, TheStreet Ratings uses a quantitative approach to rating over 4,300 stocks to predict return potential for the next year. The model is both objective, using elements such as volatility of past operating revenues, financial strength, and company cash flows, and subjective, including expected equities market returns, future interest rates, implied industry outlook and forecasted company earnings.
Buying an S&P 500 stock that TheStreet Ratings rated a buy yielded a 16.56% return in 2014 beating the S&P 500 Total Return Index by 304 basis points. Buying a Russell 2000 stock that TheStreet Ratings rated a buy yielded a 9.5% return in 2014, beating the Russell 2000 index, including dividends reinvested, by 460 basis points last year.
Check out which tobacco companies made the list. And when you're done, be sure to read about which volatile aerospace and defense stocks to buy now. Year-to-date returns are based on June 23, 2015, closing prices. The highest-rated stock appears last.