Do investors have a reason to worry?
- There’s a small worry that some of Philip Morris’ larger markets could take a more stringent approach to tobacco regulation, but that appears unlikely to happen anytime soon. In the meantime, Philip Morris is going to continue to focus on China and other Eastern and Southeast Asian countries, where GDP growth levels are higher than the rest of the world and a new middle-class is emerging. With its dividend yield of 4%, short-sellers would be wise to keep their distance and stick to betting against U.S.-based tobacco companies if they want to bet against Big Tobacco.
Source: Bryan, Flickr.
Brown-Forman
Why are short-sellers avoiding Brown-Forman Corporation (NYSE:BF.B)?
- Similar to Philip Morris, alcohol is a vice that remains somewhat unaffected by the ebb and flow of the global economy. Short of a depression, Brown-Forman Corporation (NYSE:BF.B) is able to rely on its Jack Daniel’s and Southern Comfort brand-names to fuel stable cash flow. With a relatively low beta of 0.46 and a dividend that’s been raised for 29 straight years, short-sellers really don’t have that quick bang-for-your-buck potential that they’re often looking for in a short-sale opportunity with Brown-Forman.
Do investors have a reason to worry?
- Alcohol is generally able to weather economic downturns, but it’s not exempt. Between the threat of a slowing global economy and a first-quarter earnings report that delivered a 3% decline in adjusted earnings thanks to rising costs, I believe investors should exercise a degree of caution here. Also, the company is spending $100 million on a massive expansion of its Jack Daniel’s distillery, which may be a great move when we look back 10 years from now — but it could also be a reason higher costs outpace bottom-line growth for the next couple of years.
McKesson
Why are short-sellers avoiding McKesson?
- McKesson, a pharmaceutical, medical supplies, and health-care information technology provider, is a company most short-sellers will avoid simply because of its unique and diversified position within the health-care industry. As the baby boomer population ages, the need for medical care, electronic health record platforms, and pharmaceutical delivery will only increase, helping McKesson. As a model of consistency, McKesson’s full-year EPS is expected to increase from just north of $8 in 2014 to more than $11 per share by 2017.
Do investors have a reason to worry?
- Given McKesson’s ability to combine organic growth with growth from acquisitions, I can’t conjure up a good reason short-sellers would consider betting against McKesson. Many of these larger health-care plays have stable cash flow in just about any economic environment, pay a healthy dividend, and are only likely to see revenue head higher as the baby boomers age. In sum, I’d consider this steady as she goes for McKesson’s shareholders.
The article The S&P 500’s 5 Most Loved Stocks originally appeared on Fool.com and is written by Sean Williams.
Fool contributor Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.The Motley Fool owns shares of, and recommends Berkshire Hathaway. It also owns shares of Philip Morris International and recommends McKesson.
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