Loading up on sin and bling

Some sin and bling stocks for the long run?

It's hard to argue with Diageo (DEO). At a July 11 close of $103.36, the stock trades near its 52-week high. But the forward price-to-earnings ratio of 17.3 on fiscal 2012 earnings isn't too outrageous, in terms of what you're paying for future growth. This puts the stock's price-earnings to growth rate (PEG) ratio at 1.48. The company owns the Johnnie Walker brand and has recently announced that it would invest $1.5 billion to expand Scotch production over the next five years.

Anheuser-Busch InBev's (BUD) purchase of Mexico's Grupo Modelo for $20 billion, following so closely on SABMiller's (SBMRY) purchase of Australia's Foster's for $12 billion, illustrates the race among the world's big brewers to snap up brands that can add a head of growth to slow sales in mature markets. Which beer companies might be in play? SABMiller has acquired a 24% stake in Turkey's Anadolu Efes (which trades as AEFES.TI in Istanbul). The Turkish brewer exports about 75% of its production, with Russia (where it holds 20% market share) making up its single biggest export market. SABMiller also needs to find a way to challenge AB InBev's dominance in Brazil, the world's third-largest beer market. The best play there would be an acquisition of privately owned Cervejaria Petrópolis, which holds about 7% of the Brazilian market. In Africa, Kenya's Tusker, brewed by East African Breweries (which trades as EABL.KN in Nairobi) would be a way to gain share in one of the continent's fastest-growing economies. Diageo is the company's largest shareholder.

In the bling sector, the fastest-growing market is branded jewelry, which at the moment represents just 19% of the total fine-jewelry market. LVMH Louis Vuitton Moët Hennessy (LVMUY) acquired Bulgari for $6 billion in 2011, doubling its watch and jewelry sales and giving a boost to the company's drive to enter the branded watch and jewelry market. The company's Louis Vuitton Watches and Jewelry division has plans for standalone stores in New York, London and Hong Kong.

The most interesting play in this part of the bling sector, though, in my opinion, is Compagnie Financière Richemont (CFRUY). The owner of the Cartier and Piaget brands already gets 42% of sales from the Asia-Pacific region and has plans to grow its retail business in China to 250 from 160 stores.

Buying opportunity ahead?

A word of caution on buying shares of luxury-brand companies right now. Hong Kong has just announced that luxury sales grew by only 8% in May. That's the lowest growth rate since September 2009. It looks as if the slowdown in China's economy is taking a bite out of the market for luxury goods, too. I'd watch to see if I could get a piece of the smart long-term strategy of these companies for a lower price come September or so.

That would also be my approach to the Macau gambling market right now. I like the stocks of the companies with big positions in the explosive growth of gambling in Asia -- and especially Las Vegas Sands (LVS) or its Macau unit, Sands China (1928.HK in Hong King), and MGM Resorts International (MGM). But a slowdown in growth in Macau is putting pressure on these stocks. And I expect that pressure to increase after Sands China asked earlier this week for an extension on its permit to build a new casino resort on Macau's Cotai strip.

Let that play out for a while, and you might find a bargain or two by fall.

After all, even if you like a company's long-term strategy, there's no reason not to look to buy in after a short-term drop.

Click here to become a fan of MSN Money on Facebook

Updates to Jubak's Picks

At the time of publication, Jim Jubak did not own or control shares of any company mentioned in this column in his personal portfolio. The mutual fund he manages,Jubak Global Equity Fund (JUBAX), may or may not now own positions in any stock mentioned in this column. The fund did own shares of Anadolu Efes, LVMH Louis Vuitton Moët Hennessy, MGM Resorts International and Sands China as of the end of March. Find a full list of the stocks in the fund as of the end of March here.

Jim Jubak's column has run on MSN Money since 1997. He is the author of the book "The Jubak Picks," based on his market-beating Jubak's Picks portfolio; the writer of the Jubak's Picks blog; and the senior markets editor at MoneyShow.com. Get a free 60-day trial subscription to JAM, his premium investment letter, by using this code: MSN60 when you register at the Jubak Asset Management website.

Click here to find Jubak's most recent articles, blog posts and stock picks.

More from MoneyShow.com: