In short: Ranked #1. After the 2026 sell-off "extremely cheap" at ~12% FCF yield and ~100% DCF upside; needs only to "normalize and steady the execution." Weaker in reduced-risk products, but a ~50–60% FCF dividend payout with everything else into "massive buybacks" of cheap shares — "I might add some."
Imperial Brands is the UK cigarette and tobacco maker, still building out small vaping, heated-tobacco and pouch brands (blu, Pulze, Zone X). It is still almost entirely a traditional-tobacco business, but tobacco companies can raise prices faster than smokers quit, so profits hold up even as volumes slowly fall.
Lukacs ranks it first because it is cheap and disciplined with cash. After this year's sell-off the company generates free cash (money left after running the business) equal to about 12% of its stock-market value, and his discounted-cash-flow model (today's value of all future cash) shows roughly 100% upside. It pays out only about half to 60% of that cash as dividends and uses the rest to buy back its own cheap shares, which lifts each remaining share's claim on profits. It just needs to hit even the low end of its guidance — he says he might add some.
11:15So, misleading, these are all investment grade. Where I would be somewhat concerned is STG and not so much for the others. And with that, let's look at the table how I like these companies, how I would rank these companies. So, first I have Imperial Brands. I think it's relatively cheap. It's very profitable still.
In short: Profitability tier below the big three at roughly 25–27% return on tangible assets, ahead of Scandinavian Tobacco (which sells cigars, pipe tobacco and pouches, not cigarettes).
9:56So they have massive profitability. Then you have Imperial Brands with let's say 25 26 27% return on tangible assets followed by this company which is of course not selling cigarettes. It's selling cigars, pipe tobacco, nicotine pouches. So, it's a bit different of a business. Now, financial ambition is really about improving profitability and turning that into stronger cash flows.
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