Investors Lose a Major Justification for Holding Tobacco Stocks
It wasn’t so long ago that the stellar performance of tobacco stocks such as British American Tobacco Plc and Philip Morris International Inc. was enough justification for asset managers to hold onto their investments, despite a broader push toward socially responsible investing.
But in recent years, a flurry of European pension funds and insurers have begun divesting their holdings, putting pressure on the share prices. BAT had its worst year on record last year, slumping 50 percent, as the U.S. Food and Drug Administration toughened its stance toward the tobacco industry. Philip Morris slumped 37 percent.
The MSCI World Tobacco Index returned an impressive 1,437 percent from the end of 1999 through 2015, compared with just a 72 percent return for the broader MSCI World Index. But since 2016, when momentum for tobacco-free portfolios finally started to take hold, the industry has underperformed the broader benchmark.
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