Tobacco On Buffett's `Buy' List?

NEW YORK - Investor Warren Buffett, who has said he likes the cigarette business, may be buying tobacco stocks through Berkshire Hathaway Inc., analysts said.

Philip Morris Cos. told some analysts that Buffett has bought its shares within the past two weeks, said two analysts who spoke privately with company officials yesterday.

Separately, USA Today's Dan Dorfman reported today that the billionaire investor has purchased almost 5 percent of the common stock of UST Inc., a producer of smokeless tobacco.

Buffett, a nonsmoker, was quoted in the Economist magazine last year as saying that he is attracted to the cigarette business because the product "costs a penny to make, sell it for a dollar, it's addictive and there's fantastic brand loyalty."

Between 1983 and 1984, Berkshire made a 27 percent profit by owning stock in R.J. Reynolds Tobacco Co., now RJR Nabisco Holdings Corp., according to a USA Today survey. The company also more than tripled its money on a stake in General Foods Corp., now part of Philip Morris, between 1980 and 1985.

"We don't comment on our shareholder base," said Alan Kaiser, UST's spokesman. Officials at Philip Morris declined comment.

A spokeswoman in Buffett's office at Berkshire also declined comment.

Tobacco stocks slumped April 2 when Philip Morris said it would cut prices through promotions on Marlboro, the best-selling U.S. cigarette, in an effort to avoid losing smokers to discount brands.

Other tobacco stocks also plunged on Philip Morris' plan to protect its market share, including UST, which markets Skoal and Copenhagen smokeless tobacco.

Buffett is renowned for buying shares of companies whose managements impress him. He owns large holdings in Coca-Cola Co., Capital Cities/ABC Inc., Geico Corp., Guinness Plc, Gillette Co., Washington Post Co., Salomon Inc. and Federal Home Loan Mortgage Corp.

In Berkshire's 1992 annual report, Buffett said he's looking to make an acquisition. He said he has $2 billion to spend, and the bigger the takeover target the better.

Philip Morris and UST are considered too big to attract bids from Buffett. Philip Morris' market value is estimated at more than $43 billion, and UST's market value totals about $6.35 billion.