UST Inc., through its subsidiaries, manufactures and sells smokeless tobacco products (snuff & chewing tobacco), wines and craft beers, and premium cigars. For the nine months ended 9/30/00, net sales rose 3% to $1.15B. Net income fell 7% to $326.7M. Revenues reflect higher selling prices and volume increases in the tobacco and wine segments. Net income was offset by lower margins in the tobacco and wine segments.

December 19, 2000

UST is known better by the name of its subsidiary, United States Tobacco Company. The company has benefited this year from strong pricing trends for its core smokeless tobacco names Skoal and Copenhagen. The company also has a profitable line of affordable wines. UST is an example of a company that is considered to be recession proof. There are certain products consumers refuse to go without regardless of their current economic condition, and tobacco is one of them. A strong trend in the Money Flow and OBV tells us that investors are buying this stock. As long as fear dominates technology stocks, we will continue to seek out plays that are currently attracting available investing dollars. UST is on the verge of a breakout from a double top pattern. A move above $26.25 accompanied by strong volume would confirm a breakout. The stock closed today slightly above its short-term trend line. Therefore, we see $25.50 as support for tomorrow. The 10-DMA should provide additional support just under $25.00. Traders could consider a position in UST on a move above $26.00 on 300,000 shares or better traded by 1:00 PM EST.

Picked on December 19th @ $25.75
Change since picked +0.00
Stop Loss @ $22.50

January 4, 2001

Wednesday's historic rally was not good news for tobacco. Traders had been buying shares of UST because the company's core tobacco business offers shareholders a certain degree of immunity against a recession. The surprise Fed rate cut diminished the threat of a recession and reduced the attractiveness of an investment in shares of UST. The stock closed just below important support of $25.00 today. If the stock can stabilize here, it may be ripe for a bounce.

Picked on December 19th @ $25.75
Profit/Loss +1.25 (5%) (Stopped out Wednesday @ $27.00)
Best Profit +3.13 (12%)

January 3, 2001

Hit stop, write up to follow.

January 2, 2001

2001 has begun with a bear celebration. UST, which is perhaps better known as U.S. Tobacco Company, actually managed to fend off the bear assault and finished with only a modest loss for the day. Some of the decline may have been due to disappointment over the failure of R.J. Reynolds Tobacco (RJR) to deliver a takeover offer over the weekend. UST's proprietary products would be a natural fit for RJR, especially UST's Copenhagen and Skoal smokeless tobacco products. UST did come close to our $27.00 stop. Fortunately, this support level held and became somewhat stronger today due to a successful test. This support is confirmed by the 10-DMA, which closed at $27.47. If takeover speculation resurfaces and/or value stocks become popular again later this week, look for UST to test the $30.00 resistance. The MACD is still positive, but the Money Flow and OBV are starting to lose a little of their luster, so pick your entry points cautiously.

Picked on December 19th @ $25.75
Change since picked +1.63
Stop Loss @ $27.00

December 31, 2000

Shares of this major smokeless tobacco producer slipped only a little on Friday, as owners of this value stock appeared unwilling to part company with their holdings. We mentioned in our last report that there is renewed speculation that RJR may be eyeing UST for a possible takeover. RJR has the cash to get a deal done and the economy of scale savings would be substantial. In the meantime, long term shareholders appear content with UST’s low P/E of 10.39 and the stable growth that UST promises to offer going forward (not to mention the substantial dividend yield). Now that UST has climbed back into the trading range that the stock was stuck in throughout much of the 1990’s, it looks like the stock could stay here for a while. The next resistance is $30.00. If resistance can be surpassed, a move to test the all time high of $36.88 (established in January of 1998) seems possible. The most recent breakout occurred at $27.00 and we are comfortable maintaining our stop at this support level.

Picked on December 19th @ $25.75
Change since picked +2.31
Stop Loss @ $27.00