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Looking at the one year price chart for British American Tobacco shares, you might feel a little disappointed. The share price peaked last year in early June at 5643. At the time of writing it was trading at 5106. Not the end of the world, but the stock has come off a fair bit in 2H 2017.

But there is no evidence of any major concerns surrounding the tobacco giant. Indeed, it is starting to look like it may be the tobacco stock to own in 2018.

British American Tobacco shares – darling of the market?

US-based broker Sabrient has British American Tobacco as a buy, and you can see why once you get into the numbers. Sabrient publishes proprietary stock research, including quantitative analysis on stock performance. In the case of British American Tobacco, the company scores well against both its peers in the tobacco industry AND the S&P 500 in terms of growth, momentum and earnings.

Sabrient has given British American Tobacco shares a growth score of 74.2. This compares with 18.4 for Philip Morris International Inc. On momentum it scores 60 against a staggering 2.3 for Philip Morris. That’s a staggering difference. It also helps to illustrate the bad shape Philip Morris is in.

Comparing the performance of British American Tobacco shares against tobacco shares more generally, it has outperformed already against the industry, and we don’t see why it can’t continue to do so for the rest of Q1.

BAT looks to Trump for tax windfall in North America

But there are other factors here as well. It’s Donald Trump. He’s not a smoker himself, at least not these days, but it is highly likely to be a direct beneficiary of the Tax Cuts and Jobs Act. The group has said that it expected a non-cash exceptional tax credit as a result of the revaluation of its deferred tax balances arising from the acquisition of Reynolds American.

British American Tobacco is already the favourite among UK brokers and analysts going into 2018, with a staggering 16 out of 17 rating it a buy.

Is there a downside? Sabrient thinks BATS is looking a little expensive against its peers and there are some grounds for this. Hence we would not expect the stock to shoot the lights out in 2018. But there seems no reason why it can’t beat its 2017 high in the next few months.

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Please note this article does not constitute investment advice. Investors are encouraged to do their own research beforehand or consult a professional advisor.

Stuart Fieldhouse

Stuart Fieldhouse

Stuart Fieldhouse has spent 25 years in journalism and marketing, including as a wealth management editor for the Financial Times group, covering capital markets and international private banking, and as an investment banking correspondent for Euromoney in Hong Kong. He was the founder editor of The Hedge Fund Journal.

Stuart has worked at CMC Markets, supporting the re-launch of its global financial spread betting and CFD trading platforms. He is also the author of two books on trading, published by Financial Times Pearson. Based in The Armchair Trader’s London office, Stuart continues to advise fund managers, private banks, family offices and other financial institutions.

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