Equity income funds stub out tobacco stocks despite M&A

Equity Income fund managers are yet to warm to the tobacco sector, despite a strong 2014 for stocks driven by M&A and their defensive qualities.

Since the start of the year the UK’s tobacco giants have prospered despite a lacklustre spell for equities in general. A blockbuster M&A deal on the cards in the US has reinvigorated shares in the last quarter, after years of speculation about potential consolidation in the sector. In March it emerged US firm Lorillard jumped on speculation Reynolds American will bid for the $19bn company. UK stocks also climbed on the news with British American Tobacco – which owns 42% of Reynolds – and Imperial Tobacco both seeing sharp gains post the merger talk. Now trading near its 52-week pea...