Regardless of what happens these days, the market seems to push higher. Interest rates shooting up? No problem. Energy and other prices are skyrocketing? Buy the dips and forge ahead. Political wrangling over immigration and economic policy are unresolved? No sweat. The gains continue almost unabated, thanks to continued excess central bank provided liquidity, a huge increase in retail trading volume and the constant flow of money into passive index and exchange-traded funds. The top stocks that influence the indexes just keep pushing everything higher.
The reality is a sell-off is probably coming, and while it doesn’t necessarily mean a market crash, it could mean a fast and furious 10%, 15% or even 20% bear market territory drop. We have been looking for ideas that could stand up best in a swift sell-off, and the group known as the sin stocks may be just the ticket for worried investors.
Some portfolio managers really don’t want to discuss sin stocks in their portfolios. These are companies that sell tobacco and alcohol products or run gambling casinos. They are in sex-related industries or are weapons manufacturers, and now even marijuana producers. While at the margin they don’t all seem sinful, some money management companies refuse to own any of them.
We screened the BofA Securities research database for companies that fall into this rather dubious category and found five stocks that look like outstanding values. They are all rated Buy and should hold up well, even in a protracted bear market. It is important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.
This maker of tobacco products offers value investors a great entry point now and was hit recently as cigarette sales have slowed. Altria Group Inc. (NYSE: MO) is the parent company of Philip Morris USA (cigarettes), UST (smokeless), John Middleton (cigars), Ste. Michelle Wine Estates and Philip Morris Capital. PMUSA enjoys a 51% share of the U.S. cigarette market, led by its top cigarette brand Marlboro.
Altria also owns over 10% of Anheuser-Busch InBev, the world’s largest brewer. In March 2008, it spun off its international cigarette business to shareholders. In December 2018, the company acquired 35% of Juul Labs, and it has purchased a 45% stake in cannabis company Cronus for $1.8 billion.
Shareholders receive a 7.64% dividend. BofA Securities has a $53 price target on Altria stock, and the consensus target is $48.33. The stock closed on Tuesday at $47.15 a share.