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No. of Recommendations: 7
Phillip Morris. it's a bit of conundrum for me because of the currency issues. Underlying biz has been pretty healthy (pricing is the single most important issue longer term), but EPS expectation for '16 is down from $6+ two years ago to $4.30 today, almost all on currency. Stock is flat for three years but P/E actually expanded to all-time high. 5% dividend is nice, and probably safe unless we get another negative move in currency.

2/26/15: $82: Currency is the elephant in the room, with another $1.15 hit to EPS in '15. Guidance is for $4.30. Underlying fundamentals are actually quite strong, with market share gain, good cost control, and potentially promising new products. The problem is stock has re-rated higher despite negative EPS revision, and it now trades at 19x, highest in history, though not out of line with other consumer product names. Buying at current point will not see any multiple expansion, and while the 5% div yield is nice, one has to be making a bet that some of the currency losses will be reversed to offset multiple compression. There will be no buyback either since all FCF is spent on dividends, and B/S is near mgmt target. The core biz is probably worth high teens multiple given the 8-10% stable EPS growth profile. Worth a closer look at $75. Note this stock has been flat for 3 years now.
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