Company name Reynolds American, Inc.
Stock ticker RAI
Live stock price [stckqut]RAI[/stckqut]
P/E compared to competitors Good

MANAGEMENT EXECUTION

Employee productivity Good
Sales growth Poor
EPS growth Poor
P/E growth Good
EBIT growth Poor

ANALYSIS

Confident Investor Rating Fair
Target stock price (TWCA growth scenario) $43.57
Target stock price (averages with growth) $44.53
Target stock price (averages with no growth) $34.43
Target stock price (manual assumptions) $38.83

The following company description is from Google Finance: http://www.google.com/finance?q=rai
Reynolds American Inc. (RAI) is a holding company. The Company's operating subsidiaries include cigarette manufacturer in the United States, R. J. Reynolds Tobacco Company; the smokeless tobacco products manufacturer in the United States, American Snuff Company, LLC (American Snuff Co); the manufacturer of cigarette brand, Santa Fe Natural Tobacco Company, Inc. (SFNTC), and Niconovum AB. RAI operates in three segments: RJR Tobacco, American Snuff and Santa Fe. The RJR Tobacco segment consists of the primary operations of R. J. Reynolds Tobacco Company. The American Snuff segment consists of the primary operations of American Snuff Co. Santa Fe manufactures and markets cigarettes and other tobacco products under the NATURAL AMERICAN SPIRIT brand. On February 28, 2011, RAI completed the sale of Lane Limited.

 

Confident Investor comments: At this time, I think that a Confident Investor can cautiously invest in this stock as long as the price is correct. Most of the fundamentals of this company are good but there are some concerns. This is the type of company that some people would prefer to not invest in due to its reliance on revenue from tobacco products. I do not think you should invest in a company if you are morally opposed to its products.

If you would like to understand how to evaluate companies like I do on this site, please read my book, The Confident Investor.

I am regularly asked about the indicators that I use in my investment strategy. To refresh your memory, GOPM (Grow on Other People's Money) is the strategy that I teach in my book, The Confident Investor. It has a couple of main tenets:

  1. You should only invest in truly Good Companies.
  2. You probably do not have enough money to have a balanced portfolio of "buy-and-hold" positions in truly Good Companies.

To get around the realities of the second tenet, I have developed a trading methodology to help. This methodology allows you to invest in companies that are currently experiencing a bull market. It also avoids those that are in a bear market. Almost all companies experience times when their stock price drops. This means that you have your money invested when the stock is going up, and it is invested elsewhere when the price is falling.

For the balance of this article, I am going to explain why I have modified some standard indicators. These indicators help to signal the bull and bear action of the stock. This explanation will only be available for registered owners of my book, The Confident Investor. If you own the book, you can register and log in to see the balance of this article. If you don't own the book, you can purchase my book wherever books are sold such as AmazonBarnes and Noble, and Books A Million. It is available in e-book formats for NookKindle, and iPad