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The possible acceptance of a settlement between the tobacco industry and the 46 state attorneys general concerning Medicaid has allowed these stocks to outperform the market in 1998. Litigation has been favorable to the industry and many tobacco companies are planning to separate their non-core business from their tobacco operations, as well. Investors need to be selective with these stocks as the Medicaid settlement terms are not yet known.

There are a large number of uncertainties related to the tobacco industry due to Medicare suits, fresh negotiations with state attorneys general, and the death of the national settlement proposed by Sen John McCain. A large number of tobacco industry suits concerning cancer and Medicare have been settled, but the industry is still vulnerable. These stocks are suitable mainly for aggressive long-term investors and not conservative accounts.

Pending Medicaid litigation from the states and potential legislation in Congress have made the tobacco a hot economic topic during the late 1990s, and it is difficult to speculate what may occur. In addition, the US market for tobacco companies has become competitive, but the international tobacco product market is booming. These stocks are not timely in 1998 and are best avoided by investors.

Support seems to be waning for the passage of legislation by which the tobacco industry would be exempt from litigation in exchange for sweeping restrictions and possible regulation, and a legal settlement is not near. However, industry results as a whole were good in 1997, but 1998 is not expected to be nearly as good as previously. The future of the industry is still unsettled and risk-averse investors should avoid these stocks.

The tobacco industry is expected to have higher sales and earnings for 1997 after a good 3rd qtr, due primarily to the booming markets outside the US. The impact of the settlement between the tobacco industry and its adversaries is not yet known, and there are a number of outstanding legal cases, although several have been resolved. Individual stocks in this industry are best suited for aggressive portfolios and investors.

The tobacco industry will continue to experience strong sales and profit growth due to its success in emerging markets, but tobacco stocks are likely to be volatile as a result of the proposed settlement between tobacco companies and their critics. Conservative investors should avoid tobacco stocks because the proposed settlement has yet to be accepted by Congress or the President.

Tobacco stocks have become more volatile during the past three months because of litigation and settlement talks between the industry and its opponents. Conservative investors should avoid tobacco stocks, which will continue to trade erratically in the next three to six months. An industrywide settlement would benefit tobacco stocks, and aside from the litigation issue, tobacco companies are healthy.

Profits for the tobacco industry increased by 25% in 1996 with strong US and international markets. The 1997 earnings potential for multinational tobacco companies is strong, but tobacco consumption in the US will be only slightly positive or flat. Litigation may impact tobacco companies in 1997 and could affect investment opinion significantly. These stocks are not appropriate for non-aggressive investors in 1997 due to potential litigation losses.

Investment in the tobacco industry is considered hazardous for the immediate and long range future despite the good financial operating results reported by companies within the industry. A plethora of public and private legal actions and little possibility of private settlement of these cases makes investment in the tobacco industry an unpredicable and risky undertaking. Some companies with strong balance sheets might possibly be an investment source but only on a long term basis/

The tobacco industry's future in the international market looks profitable, but in the US declining sales and pending litigation pose threats. Another problem is the prospect of Food and Drug Administration regulation of cigarets and smokeless tobacco products. Tobacco company stocks do not appeal to most investors for the short term. Only companies with international markets or diversified interests offer promise as long term investments.

Tobacco industry securities declined sharply in the 1st qtr 1996 but experts are predicting that the industry will have high earnings and prices for the next six months to one year and probably for several years beyond 1996. Tobacco industry expansion into new or developing foreign markets should offset and surpass the negative impact of Liggett's liability case settlement, the anti-tobacco furor that has caused pension funds to stop investing or withdraw from tobacco companies, and an increase of state government suits to recover Medicaid costs. Tobacco industry stocks are a good investment for those who are willing to risk litigation outcomes.

A favorable product mix and higher pricing allowed the tobacco industry to increase earnings about 14% in 1995, and this is expected to continue in 1996. Privatization and proximity to other former Soviet-bloc nations has made Poland the third-largest tobacco market in Europe. The investment community is also now less concerned about the industry's legal problems. These stocks will outperform the market in the next six to 12 months.

The tobacco industry is facing legal action at federal and state levels. A federal suit has been filed on behalf of addicted smokers, Florida is attempting to recover Medicaid expenses, and the FDA is drafting underage smoking rules. Sales and earnings are increasing, however, due to increased non-US markets and other factors. These stocks will outperform the market in 1995 and 1996, but are too volatile for conservative investors.