Individual investors should always look to see if smart money
is going into or out of a stock.
One way to gauge that is to count how many funds that are
rated by IBD as A+ are opening positions, adding shares or
standing pat with existing positions, vs. funds that are exiting
or lessening exposure.
Cigarette makerLorillard (
) might not seem like a magnet for elite funds. However, in the
first quarter, 15 A+ funds either opened positions or added
shares; five stood pat with existing positions; three lightened
positions modestly; and zero A+ funds exited the stock.
Quality fund support often means something new is going on in
a stock. For Lorillard, the Blu e-cigarette company that it
acquired in April 2012 might be the new factor.
"This is going to be a very big category," Lorillard CEO
Murray Kessler said at a Tobacco Merchants Association meeting in
2012. "I don't think you've seen anything yet."
How big could e-cigarettes get? Consider this: In old movies
actors commonly smoked on screen, adding glamour to cigarettes.
That's faded since 1950, according to an
. Flash forward to the 2010 film "The Tourist."
In one scene,
Johnny Depp sits on a train, smoking an e-cigarette, and Angelina
Jolie is drawn to him.
Is the cool factor reborn in e-smoking? Hard to say, but the
potential is there.
Blu e-cigarettes contributed only about 3.3% of Lorillard's
net sales in 2013. Some might say that's too small a factor to
matter. (Some analysts said the same when Apple started selling
The e-cigarette space is fragmented, but Blu has a 47% market
share. As of December, Blu was available in 136,000 retail
Critics of e-cigarettes say the nicotine cartridges are made
in China with no controls over what's in the liquid. Blu makes
its liquids in the U.S., with quality controls, before exporting
them to Asia for assembly.
Lorillard's annualized dividend yield is 4.6%. The stock is in
a buy zone to 56.04.