What role should tobacco stocks play in investors' portfolios?

The tobacco sector is unlike any other in which we can invest. Its core products are fundamentally flawed by causing harm to their consumers.

It is highly regulated, highly taxed but still legal in all countries except Bhutan and Turkmenistan. This industry shares a number of characteristics with other successful consumer sectors - highly branded products and regular repeat purchases that lead to a high degree of pricing power and profit margin improvement potential.  Regular increases in tobacco taxes have desensitised consumers to price rises, which makes it easier for tobacco companies to increase their take. As UK investors we are fortunate to have two of the major global companies, British American Tobacco (BAT) a...