Happy Cinco de Mayo! There’s perhaps no better time than now to review the market’s sin stocks that capitalize on our thirst for adult beverages. Sin stocks, companies whose product offerings are considered bad for our health, often suffer scrutiny from more socially conscious investors.
However, for investors fixated on finding the most profitable opportunities, the alcohol industry offers some extremely well-known businesses backed up by powerful brands. Here are four publicly traded sin stocks worthy of further research.
Industry heavyweights with stables of powerful brands
While Diageo plc (ADR) (NYSE:DEO) and Brown-Forman Corporation (NYSE:BF.B) might not be instantly recognizable, it’s likely that many investors came across one (or more) of their brands while stocking up for Cinco de Mayo festivities. That’s because these companies offer some of the most widely consumed liquor brands in existence.
Diageo plc (ADR) (NYSE:DEO) manufactures Jose Cuervo tequila, as well as Crown Royal and Bushmills whiskey. This is in addition to its other highly popular products, which include Johnnie Walker, Smirnoff, Captain Morgan, and Tanqueray.
Brown-Forman Corporation (NYSE:BF.B), meanwhile, produces the juggernaut Jack Daniels brand, as well as Southern Comfort.
Going where the growth is
Diageo plc (ADR) (NYSE:DEO) is firing on all cylinders. The $77 billion, U.K.-based company realized 8% sales growth and nearly 22% operating profit growth in 2012 — very impressive numbers in an industry scrambling for new growth opportunities.
Brown-Forman Corporation (NYSE:BF.B) has also reported solid growth recently. The company realized 9% growth in fiscal 2012 sales and operating income, and rewarded its shareholders in turn. Not too long ago, Brown-Forman Corporation (NYSE:BF.B) provided investors with a 9.5% dividend increase.
The beer market, meanwhile, is in a different situation, struggling with saturated markets. The U.S. alcohol market is extremely mature. Growth in consumption of alcohol has leveled off in the U.S.
For instance, Molson Coors Brewing Company (NYSE:TAP) reported that its beer volumes fell 0.5% in the United States, its largest geographical segment, in 2012. To combat this, the company made emerging market expansion a high priority.
Molson Coors Brewing Company (NYSE:TAP) first broke into the emerging markets with its $3.4 billion acquisition of Central and East European brewer StarBev last year. Until then, the United States made up more than 68% of Molson Coors Brewing Company (NYSE:TAP)’ total sales, and the company’s international operations were limited to Canada and the United Kingdom. By acquiring StarBev, the company will boost its portfolio of brands and grant it access to faster-developing economies.