THE SMOKING HOT NEW INVESTOR TREND

Tomorrow I’m introducing you to a newly listed pubco that I truly believe is set up to be TAAT 2.0.

As a reader of mine you know and love TAAT——TAAT Lifestyle and Wellness (TAAT-CSE).  I first introduced you to TAAT on July 6th of last year————and shortly after we were rewarded BIG TIME!

 

That is a BEAUTIFUL stock chart—and a great reminder of why I spend so much time digging in the junior market for the next great growth stock.  Just a few of these make a big difference to your portfolio.

TAAT went from 50 cents to $5 in 3 months as investors became convinced that it’s nicotine free, tobacco free stick could find a market. It has in fact had three runs to $5…

…Because EVERYBODY wants to live healthier.  NOBODY wants to be addicted to nicotine.

TAAT laid out the strategy.  TAAT showed how it should be done.  TAAT showed it could be done.

The new pubco that I have coming at you tomorrow is right where TAAT was at 50 cents. It has a proven, healthier product in the global smoking market, ready to go. It’s ready to roll out.

Sequels are rarely as good as the originals.  But I believe that this one—that I’m calling TAAT 2.0—is.

The Tobacco Industry Is Making
A Shockingly Fast Pivot To ESG
 

Every management team, in every industry is now desperately making their company “ESG” friendly. This is where all the institutional dollars are going.  If you aren’t ESG…NOBODY is going to own your stock.

No industry needs to transform itself more than Big Tobacco.  And no company in Big Tobacco is making a FASTER push to ESG than the $150 billion market-cap Philip Morris (NYSE-PM).

With not a bit of exaggeration——Philip Morris has gone all-in on ESG.  The company hasn’t dipped its toes in the water.  They are jumping into the deep end head-first.

Philip Morris openly wants to put its legacy combustion cigarette business behind it.  Front and center on the Philip Morris website is the mantra “PMI: Delivering a smoke-free future”.

We will take decades to transition away from oil, but the transition away from traditional cigarettes might get done in just 10 years.

Philip Morris isn’t quitting tobacco…but they are quitting the business of making tobacco products that consumers burn.  And they are doing it as fast as they can.

The ESG basis for smoke-free is that it is safer.  Philip Morris quotes a 90-95% reduction in exposure to harmful chemicals in switching away from traditional burning cigarettes.

They have spent billions researching the issue and they have concluded that non-burning tobacco products are exponentially safer and Heat-Not-Burn is the future of their business.  Clearly….. they believe it because management and the Board are betting the entire $150 billion company on it.

Philip Morris calls this the biggest shift in the company’s history—the entire presentation from the Philip Morris CEO at this year’s analyst investor was focused on company’s move to smokeless.

This move is happening incredibly FAST.  Philip Morris has said within 10 years they want to completely convert all of their cigarettes to smokeless options.   All of Big Tobacco is going to be doing the same.

Heat-Not-Burn: The Smoking Hot New Trend

 
I love fast.  Fast is good.  Fast means growth.

The Philip Morris smoke-free transformation strategy is shockingly ambitious.  In 10 years they aim to convert their traditional cigarettes to smokeless.  By 2025 the company plans to have 50% of its net revenues from smoke-free products.

Again—these are targets that are all from the company’s presentation.

This is such a huge company that the numbers involved are hard to believe. Revenue in 2020 for Philip Morris was $76 billion——so 50% of that means–they want to have $38 billion of revenue from smoke-free within five years.

Never would have I expected the tobacco industry to be moving that fast.  I mean, as the move from a traditional cigarette they are transitioning from a product that is estimated to date back to 5000 BC!!!

Now it will be gone in the next 10 years….

So——getting long smokeless HAS TO BE a winning strategy for investors. 

This is extracted from the Philip Morris analyst day presentation:

If you aren’t familiar with Heat-Not-Burn, now is the time to learn.

It has the fastest growth, biggest scale AND best economics…….no wonder Philip Morris has identified Heat-Not-Burn as the product line to pursue most aggressively.

Heat-Not-Burn is exactly as it sounds.  Instead of lighting the tobacco on fire the smoker uses a device that heats it, so no burning and no smoke.  Avoiding smoke is the key that Philip Morris believes (from billions of dollars of research) will make tobacco less harmful…and more ESG.

With Heat-Not-Burn—smokers get the same experience & high as regular cigarettes—but without all of the associated chemical by-products from combustion.

The economics are great for Philip Morris.  The product is one that hardcore smokers will actually enjoy.  E-cigarettes, vaping, and other products aren’t close to the same—research shows most return to cigarettes—which is why Philip Morris is betting so big on Heat-Not-Burn.

Heat-Not-Burn Is Moving Around The World–FAST

 
The Heat-Not-Burn experience is very similar to smoking—and in some ways much better.

1 – Essentially no linger odor from it, so you don’t ruin a room or entire house
2 – Your hands and clothes don’t smell like tobacco
3 – There is no ash created, so no filthy ashtrays

North American is one of the last places on earth that the Heat-Not-Burn movement is reaching. It is huge in Asia, big in Europe and is just starting here. It’s ground-floor in North America!  Heat-Not-Burn was just recently approved for sale by the FDA in the US.

In Japan for example, Heat-Not-Burn growth is SMOKING HOT!

In 2015 Heat-Not-Burn had no market share amongst smokers in Japan.  None. Five years later Heat-Not-Burn has a 25% and growing market share.

The Japanese smokers have spoken—same experience, believed to be exponentially safer, cleaner, doesn’t smell.  They are adopting it incredibly fast.

Philip Morris is so convinced this is the future that they are BETTING EVERYTHING on it…

Their big push in Heat-Not-Burn is just starting in North America.  That is a huge tailwind for my Heat-Not-Burn junior.

Yes, this about to get really big, really fast.

The size of the prize gets my mind racing. 

There are 1.3 billion smokers in the world…..if the rest of the world follows Japan’s lead that means that 325 million of them could be using heat-not-burn within just a few years.
 

Philip Morris’ ONLY BIG PROBLEM Is…

 
IQOS is the name of the brand that Philip Morris is trying to establish as the world’s dominant Heat-Not-Burn brand.

I-Q-O-S stands for I Quit Ordinary Smoking. It is the cornerstone of this $80 billion transition to smokeless.

It is already the #1 smoke-free brand on the planet, with Asia leading the charge and Europe coming up fast.

But it could be doing better.  In fact a lot better——because the IQOS smoking experience has one VERY

INCONVENIENT TRUTH that stands in the way of this getting even bigger:

Their device needs almost CONSTANT CLEANING!!

Ughh.  I can’t imagine the hassle.

It is a major problem for Philip Morris and every other Big Tobacco company that is trying to transition their entire business.  Without constant, daily cleaning the IQOS Heat-not-Burn device doesn’t work properly.

The taste quickly gets worse. And even with the constant cleaning, the device or pod develops a pretty nasty smell.

No smoker wants to have to constantly clean their heating device.  Smokers want convenience, not another responsibility to add to their daily list.

Philip Morris actually has to send out regular reminders to customers that their IQOS device has to be cleaned every day. Here’s an example:

This is the biggest hurdle for Philip Morris & Big Tobacco to move its billion customers to Heat-Not-Burn. This daily chore must be done

Philip Morris NEEDS Heat-Not-Burn to work. If not, that compromises the ESG mission that Big Tobacco is desperately on.

If only there was a solution to this constant cleaning nuisance!!!

DO NOT MISS MY EMAIL TOMORROW!!!!
This Company Holds The Keys
To The Heat-Not-Burn Kingdom

 
Philip Morris and every other Big Tobacco has a Heat-Not-Burn cleaning problem—and it’s a multi-billion dollar problem.

They need that cleaning inconvenience removed from the experience.

Tomorrow, I’m going to give you the name and ticker of a company that has the solution——a fully patent protected Heat-Not-Burn technology that requires ABSOLUTELY ZERO CLEANING and has no lingering odor……which guarantees a better customer experience.

This is the better mousetrap for a market that sees 5.7 trillion cigarettes smoked per year.

It is patent protected.  There were 6 years of research done on this device and then another 36 months of the patent process.  Nobody on the planet other than this company has this technology…AND EVERY Big Tobacco company in the business needs it.

But I don’t want you to think this company is competing with Philip Morris.  The Heat-Not-Burn market is growing FAST—there is room for all for now.  This young market is not even close to a zero sum market share fight.

Consider what this company is looking at with this technology/device:

1 – Philip Morris wants to convert all of its customers——which is $80 billion of annual revenue to smokeless products. All the other Big Tobacco companies want this too.

2 – Heat-Not-Burn is the most profitable product for Big Tobacco to sell.  This is the way forward.

3 – Heat-Not-Burn is the only smokeless way for customer to have the real smoking experience.  This is how to win the heart of smokers.

My readers had a great winner with TAAT-CSE in just a few months.  This patented Heat-Not-Burn product will attract similar users—and similar investors.

Lastly—let me leave you with this until tomorrow—here is the kicker that could make this company a TRULY EXCEPTIONAL growth story……..it has the first mover distribution advantage over every competitor in the biggest Heat-Not-Burn market of them all—CHINA!!  There are 400 million smokers in China.

Philip Morris does not have IQOS in China.  But this junior already has a strategic alliance with a massive Chinese distributor who is selling 50 million sticks a month there already!

There are no guarantees when investing in junior start-ups, but the opportunity in front of this company is undeniably enormous.

Look to your inbox tomorrow.  You’ll be amongst the first investors on the planet to hear this new pubco’s exciting story.
 
 
Sources:
1) https://www.sec.gov/ix?doc=/Archives/edgar/data/1413329/000141332921000007/pm-20201231.htm


Keith Schaefer
Publisher, Investing Whisperer