Last week, and once again on Monday, investors showed a large degree of risk-off panic as the Treasury market saw some serious selling and interest rates went higher across all maturities. Still, rates are historically very low, and the spread between the five-year and the 30-year bonds is a paltry 57 basis points. Nevertheless, investors are scared, and the sellers appear to have the upper hand, as the Federal Reserve has made it clear that interest rates will be going higher this year, maybe as early as March.
One category of Wall Street that some portfolio managers really do not want to discuss in their portfolios are the so-called sin stocks. These are companies that sell tobacco and alcohol products, run gambling casinos, sex-related industries, weapons manufacturers and now even marijuana producers. While at the margin they do not all seem that sinful, some money management companies refuse to own any of them.
We screened our 24/7 Wall St. 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, pay solid and reliable dividends 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 7.12% dividend. Piper Sandler team has a $53 target price for Altria stock, and the analysts’ consensus target is just $48.33. Shares closed on Monday at $50.54.
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