I recently added Altria to my portfolio citing the transformation of its business and low valuation. Unfortunately, it turned out to be a falling knife, with the stock falling almost every day since I bought it. The concerns are threefold; high debt, declining cigarette sales, and a vaping ban. Over the past several months, there have been an increasing amount of vaping-related illness. These include lung issues, seizures, and 7-8 deaths. Vaping began gaining ground in 2015 when Juul introduced its USB sized vaporizer. Juul eventually became the dominant market leader. Recently, to combat the decline in cigarette volumes, Altria bought at 35% stake in the vape giant. And although I’m concerned with the decline in Altria’s price, I uncovered something far more troubling.
As Juul’s popularity rose, so did government involvement. Juul has been accused of marketing their product to younger individuals and insisting it’s a safer alternative to cigarettes. In 2018 the FDA labeled teen vaping as an epidemic. Juul later was forced to take down most of its social media content. In 2019 the FDA then began restricting the sale of flavored tobacco products. Shortly after, parts of the country began banning e-cigarettes. For instance, San Francisco banned e-cigarettes in June of 2019. Most recently, Michigan announced a ban on flavored E-cigarettes. At the same time the FDA began launching anti-vaping ads. And of course, this month, the federal government, Trump himself, and legislators began planning a flavored e-cigarette ban.
The FDA is still investigating whether Juul is illegally claiming vaping to be a safe alternative to cigarettes. Studies in the past have claimed vaping to be a better alternative. According to many publications I’ve read online, there appears to be little evidence of vaping being harmful. Reason being, vape smoke consists of fewer combustible chemicals than cigarettes. One of my work colleagues this week just explained to be how vaping helped him to quit smoking. Smokers inhale a wide variety of carcinogens and carbon monoxide. According to the CDC, smoking accounts for 30% of all cancer deaths and about 18% of all deaths. This stands in stark contrast to a handful of vaping deaths. It is estimated inhaling nicotine-infused vapor is about 95% less harmful than cigarettes.
The vaping related illnesses/deaths appear to be linked to black market liquids and THC. There appears to be some political agenda as these claims are buried in a sea of negative anti-vape content. If we dig deeper, we find the CDC confirming 380 cases of vape related illnesses in 36 states. They also say most used products containing THC or cannabis oils purchased on the black market. So essentially, we don’t really know what these individuals were smoking! I found this to be a red flag. When researching the true cause of death of these 7-8 victims very little information was available. Only in the fine print do we find a link between vaping deaths and a booming black market.
If I were the feds, I’d focus less on banning vaping and more on pursuing the black market. Is it just THC victims were smoking or was it something more sinister? A blanket ban on vaping will cause undue harm to retailers relying on ecigs. More importantly, it will push smokers back towards far more harmful traditional cigarettes. As mentioned earlier, we have 7-8 confirmed vaping deaths. In contrast, 18% of ALL deaths are caused by smoking cigarettes. Finally, a ban will empower the black market, as consumers will have fewer “legal” alternatives for nicotine. I originally researched vaping because of my stake in Altria. However, I find this ban to be far more concerning than 0.7% of my portfolio. After all, the government appears to be pursuing the wrong enemy! We have a growing black market of counterfeit vaping products; a market targeting teens. Who is the real enemy?
DISCLAIMER: I am long on MO. I am not a licensed investment adviser or tax professional. I am not liable for any losses incurred by any parties. This blog should be viewed for entertainment and/or educational purposes only. Any transactions published are not recommendations to buy or sell any securities. Please consult with an investment professional before making investment decisions.