Another Loss for Tobacco in Court

I have a feeling this is but the tip of an iceberg for Altria (MO)....

A major blow for the tobacco industry, reports THE WALL STREET JOURNAL, "A jury decided Thursday that a longtime chain-smoker's death from long cancer was caused by nicotine addicton, a potentially costly loss for tobacco giant Philip Morris and an important test for thousands of similar Florida lawsuits."

This was the first of 8000 such personal-injury cases. In 2006, the FL Supreme Court had upheld the complaint that the tobacco industry had knowingly sold potentially harmful products while hiding the health risks. However, it also tossed the $145 billion jury award in a class action lawsuit. As a result, plaintiff attorneys began filing personal injury complaints.

In this particular case, filed by Elaine Hess a widow of a smoker, the attorneys are expected to request millions of dollars. For BigTobacco, this could be bankruptcy by a millions of cuts.

Altria. It has been a wonderful investment bought back in 2000 for a now adjusted $4 a share it has produced shares of Kraft (KFT), sold, and Phillip Morris International (PM), still held. It has also produce thousands of dollars in dividends over the years. I will hold PMI as it yields 5%, has great growth prospects and little ligation risk.

But, I fear things are going to take a turn for the worse here domestically and with already owning shares of the international tobacco operations, it is time to exit. Will the upcoming purchase is UST (UST) help earnings? Yes. Will it offset the upcoming deluge of lawsuits against the company? Not so sure. Having Tom Daschle at HHS is also a bad omen. Whatever grand plans he has for universal health care will undoubtedly be funded in part on the back of cigarette companies through litigation or its customers through oppressive taxes.

The irony of the tax argument is that it is a "negative" not "progressive" tax. We know the less education a person has, the more likely they are to smoke. We also know that those with less education tend to be lower income earners. It this case, raising taxes to these addicts decreases their disposable income to fund grand ideas of health care for all. Nice..."soak the poor"