I bottom-fished 50 shares of Altria Group Inc (MO) today in my Roth IRA portfolio. MO suffered a 9% slide today after an unfavorable judge ruling.
My investment is mostly driven by the following thinkings:
- I understand that MO and the entire tobacco industry have some more risks after this ruling. However, as an ex-investor of RJR for more than one year, I am quite confident that all legal challenges to the industry are short-lived, and this time I see no exception.
- MO has substantial earning power from the Marlboro franchise and the economy recovery will only add to its pricing power. At $45, the stock is trading at 9.3 times this year's EPS and 8.6 times forward EPS.
- The management is capable: turning ROE of 34% for such a large company without being over-leverage (debt/equity ratio is 0.80).
- At $45, it's dividend yield is over 6% now, which adds safety to this investment.
My target price for MO is $60. I will probably add more positions if MO falls to below $40. I may also pick up RJR again if price becomes attractive.
BTW, this is my first purchase in the BrownCo Roth IRA account.