Reynolds American, symbol RAI, with a market cap of $66B, saw an acceleration of its share price in 2015. Can the price acceleration hold going into 2016?
Chart-wise, RAI went in overdrive in recent months, resulting in a deviation of 50% from its 90 WMA. That’s a red flag according to our methodology. However, in this case, we know that RAI has boosted its revenue in 2015 because of the acquisition of Newport. Without that acquisition, volume of sold cigarettes would have declined slightly. Next to the acquisition of Newport, the digital cigarette business keeps on growing.
Because of those two growth factors, we still believe RAI could be considered, even at today’s price levels. Meantime, because of the acceleration of the share price, the deviation from its 90 WMA has decreased to 33%.
We believe RAI is still a good performer going into 2016. From a growth perspective in its industry, it is clearly outperforming its peers. We believe there are other great momentum stocks in more attractive segments which should be on your watchlist in 2016.
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