Smoking and drinking are clearly bad for your health. Yet, the companies that make those products, known as “sin stocks,” have proven they can overcome any economic downturn, restrictive legislation and even mainstream criticism.

So what’s that tell you about human nature? We like what’s bad for us.

Take the huge tobacco tax hike that went into effect in 2009. The federal per-pack tax on cigarettes went from 39 cents to $1.01. And that’s just federal. In states like New York, additional excise taxes means that it now costs smokers around $11 for a pack of cigarettes.

#-ad_banner-#​That’s not even touching on the fact that you can’t smoke anywhere anymore. Most states have made it hard to smoke in public places. In many, you can’t even light up in a bar.

Yet, people still smoke.

That’s not to say tobacco companies aren’t hurting. In 2014, nine billion fewer cigarettes were sold in the United States than the prior year. Still, that’s only a 3.3% reduction in volume. And smokeless tobacco, including dip, actually increased in total volume.

Of course, the United States is only a small portion of global smoking consumption. Today, approximately 1.3 billion people around the world consume tobacco. In places like China and India, those numbers are actually growing as more people can afford “luxuries.”

From an investment point of view, Philip Morris International Inc. (NYSE: PM)‘s recent stock decline could be based on emotion more than any issue related to its financial performance.

The company is one of the largest tobacco companies in the world… and it doesn’t even sell in the United States. PM was created through a spinoff from Altria Corp. (NYSE: MO), one of the most recognizable names in tobacco.

Shares of Philip Morris have slid from $95 to $79 over the past two years, badly lagging the broader market.  In that time, the company has also hiked its large quarterly dividend from 85 cents per share to $1.02. So what’s happening here?

The company, best known for its Marlboro brands, has hit a rough patch. Net revenues in the second quarter of 2015 fell 12% year over year. That’s significant for a company with a market value exceeding $120 billion.

Part of the revenue problem stems from falling cigarette volumes. While PM isn’t directly affected by lower American consumption trends, it is impacted by lower European consumption, as those consumers are bombarded with graphic warnings about the hazards of tobacco. 

Still, I believe this share price rout is overblown.  The company’s revenue slide is more directly attributable to currency problems.

The Dollar’s Stranglehold On Philip Morris’ Profits
As is the case with many companies, the dollar’s surge, which began in 2014, is creating stiff revenue headwinds for Phillip Morris. It’s been more painful for the company than most other multi-nationals, simply because it derives all of its revenue from abroad. 

Were it not for the currency impact, the company’s reported 12% revenue slide in the second quarter would have actually been a 4.5% net revenue growth rate.

Looking ahead, is there any reason to believe the dollar will stop gaining strength against other currencies?

Despite the slowdown in China, the fiscal problems in Europe and the weakness seen across Latin America, the answer is still yes.

You see, the dollar’s value is based on investors’ perceptions above all else. Investors are currently looking around the world and asking “why ditch the dollar for all those problems?” 

That could change due to three upcoming catalysts:

1. Congress’ budget fight — while the Senate seems to be making some progress on passing a budget President Obama could sign, the House is in disarray. Representative John Boehner’s decision to relinquish his leadership post will only create more in-fighting amongst Republicans.
2. Interest rates remain near zero — With last month’s Fed decision to leave rates unchanged, it’s becoming ever-more obvious that Janet Yellen and her FOMC peers will likely wait or at least go slow enough with raising rates to give inflation a chance to rise. 
3. Presidential election cycle gets underway — While the next president won’t set up shop in the Oval Office until January 2017, the candidates will squawk at each other non-stop about budgets, fiscal planning and tax reform. And since the dollar is based on perception of strength, those words will still play a role in its value.

Any one of these factors — or anything not accounted for here — could weaken the dollar. If that happens, PM will be one of the biggest winners.

That’s not to say it doesn’t have its own problems. 

Philip Morris still faces tough regulations in Europe. It has had to enact cost-cutting measures, stop its share buyback program, and even recently had to sell a portion of its high-growth Indonesian operations. 

Moreover, it was only able to grow its dividend by 2% in the most recent quarter — the smallest hike it’s had since splitting from Altria in 2008.

But for the long-term, PM’s share price valuations are near historic lows. One mark of value: a dividend yield that now exceeds 5%.This might be a time to build up a position if you don’t mind investing in “sinvestments.”

Risks To Consider: PM’s income is tied to both the European economy and the strength of the dollar. There’s absolutely no way to know for sure how either of those two factors will play out at any given time. So it’s possible that PM will underperform for quite some time until its financial results recover.

Action To Take: Shares of Philip Morris International have taken too large of a hit when you consider that much of its weakness is related to strength of the dollar. Considering some obstacles in the USD’s way, now is a good time to build a position in this global blue chip.

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