Tobacco companies may be in the pits of public opinion, but they still get the love where it really counts: among investors.

The New York Times reported Jan. 31 that while smoking in the U.S. has been declining and more laws have been passed to control use of cigarettes, investors are still cheering Altria's plan to separate its Philip Morris tobacco business from its Kraft Foods operations -- because they see Kraft as a drag on tobacco profits. Altria shares have risen 10 percent since the split was announced in October.

Investors like cigarettes because they are addictive, require little innovation, are cheap to make, enjoy a global market, and because tobacco companies can raise prices almost at will without seeing too much dropoff in sales, experts say. Industry observers also believe that most of the legal threats to the industry have now passed.

"Something that is forgotten in all of this is people like to smoke," said David Adelman, an analyst at Morgan Stanley. "It's enjoyable and there's not an alternative product. If frozen dinners get too expensive, people will try something else. That's not true with cigarettes -- you are not up at night worried about that product that is going to make cigarettes obsolete."

In the last five and a half years, Kraft stock has risen in value from $31 a share to $34.83. But Altria's stock -- largely based on Philip Morris earnings -- rose from $47 to $87.54. "You take away Kraft out of Altria and you are left with a balance sheet that is extremely strong," said Charles Norton of the Vice Fund, a mutual fund that invests in tobacco, gambling, alcohol and military contractors. "It's just a cash cow. The free cash flow on this business is just tremendous."

Prominent tobacco analyst Bonnie Herzog of Citibank said that the cigarette business will continue to evolve to meet changing social attitudes. "It's unlikely that there will ever be a 100-percent safe cigarette, but we feel that a reduced-risk cigarette is on the horizon." On the other hand, former FDA head David A. Kessler says, "The industry knows that its days of successfully selling their product in this country are limited. They may be finding favor on Wall Street, but they're not finding favor in the public arena. There are fewer and fewer places that you can go and smoke in public."