Please find below a link to the latest issue of The Burgundy. Dominance enjoyed by wide moat companies attracts government regulation and scrutiny. For tobacco companies, such regulation is often premised on protecting customer choice or reducing social harm. Since the turn of the 20th century, success for tobacco companies has been predicated on operant and classical conditioning of the consumer, and negotiating the regulatory and legal landscapes. Despite the latter causing severe investor dissonance from time to time, the industry has been one of the best performing sectors on the stock market over a very long time.

Recently, the FDA announced its intention to reduce nicotine levels in cigarettes to non-addictive levels, which has caused great consternation among investors globally. Yet, it ignores a recurring lesson; the industry has flourished because of a series of negotiated settlements or social compacts with regulators. All indications are that this time is no different.

Click here to read the The Burgundy Issue 20