Its stock is the least socially acceptable of all investments.

It is under fire from the president of the United States, the Food and Drug Administration, the American Medical Association and an ongoing stream of major lawsuits.Use of its product is legally banned in many buildings around the country. Its customers are often treated as outcasts by co-workers and family members. It remains a topic of endless heated arguments.

Yet, surprisingly, the tobacco industry in 1996 is surrounded by an embarrassment of riches.

A recent court ruling just went its way. Its international business is growing by leaps and bounds. Domestic sales have finally leveled off after several years of decline.

And despite the negative publicity swirling around tobacco use, Wall Street strategists and mutual fund portfolio managers can't seem to get enough of these cash-rich companies and their stock.

Consider industry leader Philip Morris, whose stock was recommended by all four analysts I interviewed for this column.

The company holds a powerful position in the international cigarette business with brands such as Marlboro, its overseas sales growing five times faster than the competition's. It has increasing domestic sales volumes as well. Earnings-per-share growth is expected to be 18 percent this year.

How much cash does Philip Morris have? In August, it's expected to boost its dividend by 20 percent, to $4.80 a share. It's also likely to spend nearly $3 billion on buying back its own shares this year.

Of course, many people would never buy a tobacco stock.

For example, the AMA recently urged investors to divest stocks tied to what it called the "ruinous and enslaving" tobacco industry. It identified 13 companies that manufacture tobacco products and 1,474 mutual funds that invest in those companies' stocks or bonds. The AMA said it had written to all the 7,000 mutual funds traded in the U.S. and asked them to pledge not to invest in tobacco.

Whenever a tobacco company pops up in this column among marketwide recommendations, a number of angry letters will follow in which each writer insists the companies should never be mentioned in any context.

Yet it's impossible to pretend tobacco stocks don't exist, especially in light of their market clout and financial size. Whether one buys them or not, they're undeniably a significant part of the investment landscape.

The much-publicized lawsuit known as the Castano case would have been the largest class action in American history, were it not recently dismissed by a federal appeals court. It accused tobacco companies of concealing evidence that smoking is addictive and of manipulating nicotine levels. Tobacco stock prices jumped immediately upon the dismissal.

"I am bullish on the tobacco stocks and believe the Castano decision is the most important legal decision for the industry in the last three years, tremendously improving the legal environment for tobacco companies," said Martin Feldman, senior analyst with Smith Barney.

Even if the FDA gets jurisdiction over tobacco as it wishes and severely limits cigarette marketing here, Feldman said, profits from international business are growing 20 percent a year.

"While the Castano case removes a major uncertainty, there is still uncertainty looming in the state class action suits and in Medicaid lawsuits," cautioned Lawrence Adelman, analyst with Dean Witter. "Still, fundamentals for the stocks are excellent."

Tobacco companies will make moves this year based on their financial strength.

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"They're cash rich and every single one of them will be increasing dividends soon and buying back shares," noted Jack Maxwell, analyst with Wheat First Butcher Singer.

RJR Nabisco Holding's stock should be even stronger on the knowledge its food unit will eventually be separated from the tobacco portion. However, dissident shareholder Bennett LeBow won't see that happening immediately.

"LeBow wants the food unit separated now but, while I definitely think it will happen, it's unlikely to take place until at least 1997," predicted Anton Brenner, analyst with UBS Securities.

RJR Nabisco, with 28 percent of operating income from overseas, is a favorite of Adelman, Brenner and Feldman. Aggressive new chairman Steve Goldstone will get results. UST, a maker of chewing tobacco whose earnings should grow 15 percent this year, is a pick of Feldman and Maxwell. American Brands and B.A.T. Industries are additional Maxwell choices.

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