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Australian Fund Invested in Tobacco Stocks!

Bloomberg News had a stunning win this week, which was just hilarious.

Australia, the country that all South Africans love to hate, has some of the toughest anti-smoking laws in the world. Australia raised tobacco taxes by 25 per cent last year and says it will become the first nation to ban brand names on cigarette packaging to deter smokers. Former Prime Minister Kevin Rudd last April pledged the government would spend $85 million on an anti-smoking advertising campaign with the slogan “cigarettes are not cool.”

Now, the Australian government has a thing called The Future Fund, which was established in 2006 to cover the pension costs of retiring parliamentarians, lawmakers, judges and public servants.

Anyway, Bloomberg did some ferreting around, and discovered that the Future Fund held stakes in 14 tobacco companies as of December 31, 2010, worth $147.7 million. Including a major position in British American Tobacco! Hypocrites!

At first glance, it would appear that our PIC does not own a significant the stock in its direct R900 million portfolio. Chances are that it does own shares in the funds which it pushes out to external asset managers. Remember that anyone who held the old Remgro group company got British American Tobacco shares in the unbundling in 2008.

Why am I so negative about tobacco shares? In particular British American Tobacco seems to be doing rather well, paying good dividends, and expanding in Asia. Their balance sheet is a fit as a fiddle. The health of customers is a more tricky issue, of course. The company does now concede that “cigarette smoking is a cause of serious and fatal diseases”.

They are diversifying their product range. For example, they are working on a smokeless tobacco product called snus, which is inserted between the gum and upper lip allowing nicotine, tobacco extract and flavours to be absorbed through the oral mucosa. Does that sound tasty?

Why would you want to give those guys your savings to work with? Seriously!?

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