British American Tobacco's CEO Doubles Down: Insider Buys and a Smokeless Pivot Propel a Rally

British American Tobacco CEO Tadeu Marroco buys shares near 52-week high, signaling confidence in smokeless pivot despite overbought RSI and regulatory headwinds.

Tobacco executives rarely telegraph confidence more clearly than by putting their own money to work. At British American Tobacco, that is exactly what happened last week. CEO Tadeu Marroco and fellow director Luciana Franco Do Amaral each acquired 173 additional shares on 22 May through a dividend reinvestment plan, snapping them up at 43.7187 British pounds apiece. The purchases come as the stock trades near its 52-week high, delivering a powerful signal from the top that the company's strategic transformation is on track.

The timing is telling. BAT shares have surged more than 40% over the past twelve months and are up roughly 14% year to date, recently changing hands at €55.90. Yet the rally has pushed the relative strength index to 96.5 — a reading that screams overbought. For Marroco, who took the helm in 2023, the insider buying suggests he sees further upside despite the technical froth and a thicket of regulatory headwinds.

Behind the stock's run lies a deliberate shift away from traditional cigarettes. The core combustible market is shrinking by about 2% annually, so BAT is leaning heavily into smokeless alternatives. Its Velo Plus nicotine pouches are growing at double-digit rates in the United States, and management has set a 2026 revenue target of 3% to 5% growth, with adjusted earnings per share expected to climb 5% to 8%. The strategy is already bearing fruit: the current dividend yield of around 5.5% — paid quarterly in February, May, August and November — remains among the highest in European consumer staples.

Regulation, however, remains the industry's perennial sword of Damocles. In mid-May the World Health Organization warned against aggressive marketing of nicotine pouches and called for stricter oversight — a direct threat to BAT's fastest-growing segment. Across emerging markets, the picture is equally fraught. In Malaysia, the company's local subsidiary posted a first-quarter net loss of 35.2 million ringgit, hammered by high compliance costs and an illegal cigarette market that now accounts for nearly 57% of total sales. In Kenya, BAT has warned that a proposed tobacco control bill could destroy jobs and tax revenue. The company is trying to shape the narrative in Europe by inviting consumers and partners to consultations on future nicotine product regulation.

To bolster efficiency, BAT opened a new digital transformation centre in Bengaluru this month. The Indian hub is tasked with streamlining global business processes and strengthening the group's digital infrastructure — a move that complements the cost discipline already embedded in the smokeless pivot. On the valuation front, the stock trades at a price-to-earnings multiple of roughly 12, which analysts consider modest given the earnings trajectory. That cheapness, however, comes with an ESG asterisk: any investor bound by sustainability criteria will likely rule out tobacco stocks altogether.

The insider buying by Marroco and Do Amaral may be modest in scale, but it underscores a broader conviction that BAT’s cash generation and dividend profile can weather the regulatory storm. With the shares only a few percentage points below their 52-week high and the RSI flashing red, the near-term path is uncertain. But for those willing to tolerate the sector's unique risks, the combination of a 5.5% yield, a credible smokeless strategy, and a CEO who eats his own cooking makes a compelling case.