The Long and Short of It: Vape Stocks

by Samuel Taube, Managing Editor, Investment U
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Some say they save lives. Others say they’re just a more high-tech way to give yourself cancer...

We don’t fully understand the health impact of vapes (also known as electronic cigarettes or e-cigs). These tobacco alternatives haven’t existed long enough for longitudinal studies to assess their safety.

There are some studies that do suggest that they offer a lower risk of emphysema and heart disease compared to cigarettes. But history warns against trusting the alleged safety of cigarette alternatives, like dip and snuff. At this point, we just don’t know enough about what vaping does to the body.

What we do know is that it has caught on like wildfire. The popularity of vaping among former smokers and young people has led to substantial growth in the smoking industry. But it’s also led to more regulatory pressure from lawmakers and anti-smoking groups.

Today, we live in a world of vape subcultures, vape laws and yes - vape stocks.

It’s hard to pin down what politicians and healthcare professionals think of vaping. New studies will come out, and laws will change based on those studies. So we can’t say for sure whether investing in vape stocks is a good or bad idea.

But what we can do is educate you about some of the most prominent publicly traded companies in the industry. If new research reveals that vapes really are much less harmful than cigarettes, you should go long these stocks. But if new scientific findings or government policies discourage vaping, you should short them.

Small Cap Vape Stocks

Mainstream “vape culture” tends to favor high-end equipment made by independent manufacturers. Many vapers are former smokers who don’t trust Big Tobacco with their lungs.

Some of these independent manufacturers are tradable, making them “pure” vape stocks. However, they tend to be younger and smaller companies - penny stocks that trade over the counter.

Two of the most prominent pure vape plays are Electronic Cigarettes International Group (OTC: ECIG) and Vape Holdings (OTC: VAPE).

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As you can see, their performances over the last year have been very mixed. Despite being very similar competitors, one is up almost 100%. The other is down almost 100%.

Fortunately, there’s an alternative for investors who don’t like penny stocks.

Big Tobacco Stocks With Vape Exposure

Needless to say, Big Tobacco sees vaping as a threat to its business model. Some cigarette companies have gone on the PR warpath to deal with this threat. Ironically, a few have even used lobbyists and marketers to raise awareness about the potential health risks of vaping.

But others have adopted an old cliché as their mantra... “If you can’t beat em, join em.”

Reynolds American (NYSE: RAI) might be the biggest player in the low-end, mass-produced vape market. It owns the popular Vuse brand of e-cigs, which are sold in convenience stores around the country. It’s not a pure vape stock. But it’s about as close as you can get on the New York Stock Exchange.

Plus, as Matthew Carr pointed out in a recent article, Reynolds American has a healthy dividend. Over the last year it’s done quite well.

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It’s just too early to make a solid call about vape stocks. Their wares could be the cure to humanity’s tobacco habit. Or they might just be the next evolution of this terrible addiction.

But it seems clear that vape stocks have a volatile future ahead of them. In coming years, new discoveries and laws are going to push them way up or way down. By preparing yourself to buy or short them, you can improve the health of your portfolio.

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