Investment Analysis of Philip Morris Companies

Company: The Philip Morris Companies Inc.

Major Industries: Tobacco, Processed Foods, and Beer.

Summary of Recommendations and Conclusions

The Philip Morris Companies Inc. is a strong firm with a solid financial performance record. The company implemented a diversification (away from tobacco products) strategy several years ago, and the implementation has, thus far, been quite successful. The problem is that the company, in 1992, continues to rely heavily on tobacco products for revenues and to rely on those products even more heavily for profits. Considering the threat to tobacco products in the United States, this reliance constitutes a significant risk for the company. Of even greater immediate importance is the product liability case against a tobacco manufacturer that is currently being deliberated by the United States Supreme Court. An adverse finding from the perspective of the tobacco industry in this case would likely be devastating for all manufacturers of tobacco products. Thus, prudence dictates against a recommendation to invest in the common stock of the Philip Morris Companies Inc. prior

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ertisements affect brand selection decisions by persons who already smoke, rather than inducing nonsmokers to commence the practice. Parental example and peer pressure are seen by some observers as more important influences in individual decisions to commence smoking. The fact remains, however, that the average age of smokers continues to decline. Circumstantial evidence, thus, is against the tobacco companies. Two separate legal considerations are also involved in the cigarette advertising issue. First, there are legal prohibitions against cigarette advertising on the television medium, while there are no prohibitions on cigarette advertising on other media (Gloede, 1985, p.1). Legally, thus, there are no ways to stop cigarette advertising on other than the television medium. The second legal consideration involves the concept of fairness. Direct causal links have been established between alcohol abuse and traffic fatalities and injuries; however, beer, wine, and liquor manufacturers have not been required to suspend the advertising of their products. In fairness, therefore, an argument can be made to the effect that cigarette manufacturers should not be required to stop advertising their products; especially, as the l
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Approximate Word count = 4217
Approximate Pages = 17 (250 words per page)