Stocks of tobacco companies rosesharply as investors grew more confident that an excise tax
would not be imposed on tobacco, traders and analysts said.
    They also said the stocks are relatively inexpensive since
fear of the tax and of pending litigation regarding warning
labels for tobacco products have kept many investors away
recently.
    Philip Morris Cos &lt;MO> rose 2-5/8 to 87-3/4, RJR Nabisco
&lt;RJR> 1-1/4 to 57-1/2 and U.S. Tobacco &lt;UBO> 7/8 to 27.
    "The near-term activity of these stocks has been dominated
by external factors such as smoking restriction legislation,
concern over liability suits and the possible imposition of
excise taxes," Dean Witter analyst Lawrence Adelman said. "But
the feeling is that many of those externals have been
discounted in the price of the stocks."
    Adelman, who issued a positive recommendation on Philip
Morris earlier this week, said there have been indications that
the Reagan Administration's staunch opposition to tax hikes
would short-circuit attempts to tax tobacco.
    "The tobaccos do have more risks than regular consumer
stocks because of these external factors," Adelman said. "They
are not for the weak-hearted, but they offer a lot of value for
the aggressive investor."
    In a market where everyone is looking for affordable
stocks, trader Drew Schaefer of Kidder Peabody said, it is not
hard to understand why the tobaccos, which have been depressed
for a while in a positive market, are attracting buyers.
    Adelman believes one of the better buys is Philip Morris.
"It is a powerhouse of potential growth in earnings, dividends
and free cash flow. And the stock is cheap now," he said.
    Adelman expects Morris to earn eight dlrs a share this year
compared to 6.20 dlrs a share earned a year ago. In 1988, the
company should report a profit 10.30 dlrs a share.
 Reuter
