7 sizzling 'sin stocks'
Companies that cater to our vices -- such as alcohol, gambling, cigarettes -- can deliver heavenly profits to investors.
The medieval-era roundup of the seven deadly sins compiled by the Catholic church listed greed, gluttony, lust, envy, sloth, wrath and pride. Fast-forward to today, and many of the same vices prevail.
Companies in the businesses of alcohol, smoking, gambling and the like are practically bear-market-proof.
For example, consider mutual fund Vice Investor (VICEX), with top holdings in sin stocks related tobacco, gaming and alcohol. It has outperformed the S&P 500 over the past three years.
Here are seven sizzling stocks that add a whole new twist to behaving badly:
Anheuser-Busch InBev (BUD)
The biggest world brewer saw full-year 2013 revenue grow to $43.2 billion, up 3.3 percent from 2012. While beer volume dropped 2 percent in the U.S., BUD expects sales to strengthen in Mexico and Brazil, boosted by the 2014 FIFA World Cup.
BUD finished out 2013 with a bang by buying craft beer maker Blue Point, reacquiring South Korea's Oriental Brewing, and trying to figure out a way to bring the rest of the Modelo Group under its wings. Shares of BUD are up nearly 11 percent in the past month.
Bally Technologies (BYI)
This may be the world's oldest maker of slot machines, but Bally's reputation as an innovator and leading competitor in the market as well as being financially flexible, makes it a good bet.
Bally's has won 80 innovation awards in the past year as it continues to focus on R&D. A strong cash flow allowed the $2.6 billion company to reduce shares by 9 percent over the last 12 months and 29 percent over the past three years. In April of 2013, Bally Technologies doubled its buyback program to $300 million.
Vapor Corp. (VPCO)
Of course, e-cigs are the lesser of the two smoking evils, but there's nothing shady about the record fourth-quarter 2013 revenues for Vapor Corp., up 56 percent to $7 million. For the full year, Vapor Corp.'s revenues climbed 22 percent to $26 million.
Vapor's products can be found in more than 60,000 retail stores in the U.S. and Canada today, with Family Dollar Stores (FDO) the latest to start selling its KRAVE KING brand of disposable e-cigs. Shares of VPCO are up 152 percent over from a year ago.
Altria Group (MO)
The world's biggest tobacco company, manufacturer of Marlboros and parent company of Philip Morris USA, saw fourth-quarter profit jump 32 percent after boosting prices for Marlboro cigarettes. Net income for the quarter rose to $1.1 billion from $836 million a year earlier.
Altria dominates many of its market segments. One global market research agency estimates the world market value of the Marlboro brand at $67.5 billion, behind only Cola-Cola (KO) and AT&T (T). Altria's cigarette segment commands 50 percent of the U.S. market. Total market penetration for Marlboro alone is 42 percent, while Altria's lesser-known brands -- Merit, Virginia Slims, Parliament, and Benson & Hedges -- make up the remainder.
Despite experiencing a continued drop in domestic consumption, and despite higher "sin" taxes, Altria's stock price has managed to increase six-fold since early 2000. It also generates a healthy 5.2 percent dividend.
News this week that Reynolds American (RAI) will make a bid to buy Lorillard, the third-largest U.S. seller of cigarettes, sent LO's shares 9.3 percent higher. That was Lorrilard's biggest one-day gain since February 2012. Prior to the news, LO was down 3.2 percent for the year. The combination would bring together Reynolds' major cigarette brands like Camel and Pall Mall with LO's Maverick and Newport, the nation's top-selling menthol cigarette.
Lorillard also acquired e-cig maker Blu Ecigs for $135 million in 2012, which had a 49 percent market share for e-cigs in third quarter 2013. Blu Ecigs is already sold in 80,000 stores. LO offers investors a 4.2 percent dividend.
Wynn Resorts (WYNN)
The gaming and resort giant Wynn Resorts upped its gaming market share in the island of Macau to 11 percent late last year. That helped fuel the already-raging stock to a 108 percent gain in the past 12 months. Wynn knows Macau is where the growth in gaming is happening. The Macau gambling authority reported that the island’s gaming revenue rose 19 percent year-over-year in 2013 to $45.2 billion, about seven times the revenue expected from gambling on the Las Vegas Strip.
Shares of WYNN touched a new 52-week-high on Monday of $247.70. Wynn also owns luxury casino resort Wynn Las Vegas, which has 4,750 hotel rooms.
Constellation Brands (STZ)
It appears that the $5 billion acquisition of Grupo Modelo's U.S. beer business by Constellation Brands is paying off in dividends.
Constellation Brands, which markets wine, beer and spirits, saw third-quarter fiscal net sales percentcompany’s draft beer business grew by 30% year-over-year, with Modelo Especial sales up by 18 percent and Corona Extra up 6 percent. It wasn't just beer sales that gained steam; Constellation's wine sales also rose considerably. Total sales for Constellation are expected to increase another 7 percent in 2014.
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