Catch the hot trend on e-cigarettes

Cigarette companies are a great long-term investment and it may bring you significant income when you need it, as long as you have patience and principle. I talked about the two biggest cigarette companies (MO and PM) a few months ago. Today, I highly recommend another one, Lorillard (LO).

The traditional rationale for investing cigarette stocks is the same, as for LO. Lorillard holds a portfolio of famous cigarette brands such as Newport with a large market share. But one thing special for Lorillard is that is owns Blu, the leading electronic cigarette brand with 48% of the domestic market share as of now. While still a small portion of Lorillard's total revenue, Blu grew revenues 39% in the fourth quarter. This is still early but I think this may be a very big trend. Per some studies' results, e-cigarettes have less harmful effects than the traditional cigarettes. Apparently more and more people will smoke with e-cigarettes. Of course there will be fierce competition moving forward when more and more people realize its commercial potential but with its leading position, LO will benefit most on top of its already mature business with traditional cigarettes.

Technically, LO is also presenting its strength. As you can see below, in the past years, the LO chart is showing a step-wise uptrend. After it breaks out the previous resistance, it tends to stay and move further up. LO just broke out again from its prior level around $52. Of course it is yet to see if this breakout can stay as it was a response to a potential merger that has not been confirmed. Regardless, I'm confident that LO will continue to move up gradually and it is paying a big dividend (5%). Any weakness will be a great entry point for LO.