FDA's Nicotine Strategy Has Limited Impact on Tobacco; Pullback Reflec...

We are fairly sanguine about the impact on tobacco manufacturers' long-term cash flows from the U.S. Food and Drug Administration's announcement that it intends to lower levels of nicotine in cigarettes, and we maintain our wide moat ratings and fair value estimates. Such measures are likely to accelerate the migration of smokers to substitute products, and we expect Big Tobacco to continue dominating the industry. Although we do not believe the valuations of Altria and BAT have been impaired by...