A new technology that combines features of electronic cigarettes with sticks of tobacco may attract investors as well as smokers who are looking for a healthier alternative, a Green Bay money manager said.

The iQOS technology, developed by Philip Morris International Inc., was first sold in Japan and Italy, and is now available in a handful of other countries as well.

"What this is basically is high-tech comes to tobacco," said Mark Hilgendorf, director of equity research and portfolio manager at Associated Trust Co.

Like e-cigs and vapor systems, the iQOS (pronounced eye-cos) has a battery and heating system. But it heats actual tobacco rather than nicotine-laced liquid.

To use iQOS, smokers insert what looks like a miniature cigarette — a Marlboro HeatStick — into its tube. The iQOS device heats the stick to about 350 degrees, enough to produce a vapor, but no second-hand smoke. The older variety burn up to 900 degrees, causing the release of many more toxins, Hilgendorf said.

"When you heat it short of combustion, the toxins are reduced by about 95%," Hilgendorf said. "The nicotine won't kill you; burning the tobacco will."

Smoking is still the leading cause of preventable illness and death in the United States, he said. And Hilgendorf, a nonsmoker, says he is by no means encouraging smoking.

But despite a decline in the percent of U.S. citizens who smoke — 18% of the adult population vs. 42% in 1964 — he says that a doubling of the adult population has kept the number of smokers high: 42 million people smoked in 2014 vs. 50 million in 1964.

"There's been progress but it's not all good news because we haven't made a huge enough dent in the number of smokers," Hilgendorf said.

Even the huge excise taxes and public smoking bans have not stopped people from starting smoking, he said. But perhaps the iQOS will at least give them a lower-risk alternative, Hilgendorf said.

"I think tobacco companies, rather than all the legislation, have the best shot at reducing the harm of cigarette smoking," he said.

Hilgendorf is recommending that investors take a look at a big tobacco company.

Philip Morris International, Inc. (PM), New York, makes and sells cigarettes and other tobacco products in approximately 180 countries outside of the U.S. Its brands include Marlboro, Merit, Parliament and others. The company was spun out of Altria Group in 2008 in order to insulate its business from tobacco-related lawsuits in the U.S.

Philip Morris has spent more than $2 billion developing iQOS and other cigarette alternatives, Hilgendorf said. About 5.5 trillion cigarettes are smoked around the world each year. iQOS, obviously, has just a tiny share of that. But it also has great potential to grow, Hilgendorf said.

The company in 2015 launched iQOS in Japan, and now it has a 2.7% share of the market, he said. In Tokyo, Japan's biggest city, it has a 5% share of the market, he added. The product has been so successful in Japan, the company is capacity constrained, but a nearly completed plant in Italy that can produce 30 billion HeatStocks annually should address that problem, Hilgendorf said.

Japanese smokers consumed 1.2 billion of the new heat sticks in the second quarter alone, up from 400 million in the first quarter, Hilgendorf said. And Philip Morris found that 70% of the people who tried iQOS fully or predominantly converted to the system, he said.

About two-thirds of iQOS sales come from people who smoked non-Philip Morris cigarettes, so iQOS helps the company take market share from traditional competitors, Hilgendorf said. Profit margins are expected to be higher on iQOS, too, because, at least in Japan, the HeatSticks are sold  for the same price as traditional cigarettes but enjoy a 30% lower excise tax, he said.

Philip Morris and Altria plan to seek permission jointly from regulators to market it in the U.S. as a modified risk tobacco product, and it could be on the market here by early 2018, he said.

Marlboro is one of the most valuable brands in the world, and despite declining cigarette sales overall, Philip Morris is able to raise its price in mid-single digit increments each year, Hilgendorf said. Meanwhile, the company can provide robust shareholder returns by cutting costs, buying back shares, and continuing to pay its dividend, which is above 4% and expected to increase next month.

A significant risk here is the possibility that, with a strong anti-tobacco lobby and high levels of skepticism toward big tobacco companies, governments might require long approval times or perhaps provide no breaks on the excise taxes, Hilgendorf said. As a U.S. company, Philip Morris is also hurt by a strong dollar because its sales are all in non-dollar currencies, he said.

These shares have a 52-week trading range of $77.00  to $104.20. The have potential to reach $107 in the next six to 12 months, and $130 in the next three years, Hilgendorf said.