Hate the Brand, Love the Stock

by James Brumley | February 28, 2014 6:00 am

Hate the Brand, Love the Stock

You may dislike their businesses models. You may even feel these organizations show contempt for mankind. In fact, they may well be the scourge of the earth.

arrows Hate the Brand, Love the StockSomehow, though, you can’t help but love to invest in these companies’ stocks — morality be damned — because the returns are just so darn good. And sometimes, you just find yourself choosing the strength in your portfolio over the feeling in your gut.

In no particular order, here’s a look at some of the market’s most-loved stocks that are simultaneously some of the world’s most-hated corporations.

Walmart (WMT)

Walmart185 Hate the Brand, Love the StockTerrible pay for its workers? Check. Poorly stocked shelves? Check. Stores that are a few years overdue for a good cleaning? Check. Indeed, aside from low-prices (and the retailer isn’t even as price-competitive as it used to be[1]), it’s tough to identify any redeeming qualities for Walmart (WMT[2]).

We sure love WMT stock, though, and why not? WMT stock is up more than 400% for the past twenty years, and the company has faithfully paid an average dividend of around 2% since 2009.

Just about everyone hates to visit a Walmart store, but plenty of investors proudly hold WMT stock in their portfolios.

McDonald’s (MCD)

McDonalds185 Hate the Brand, Love the StockIf you want to know the core reason America has a growing obesity problem, just take a look at how many cars are parked under the golden arches of McDonald’s (MCD[3]) restaurants at any time of the day.

Government standards as well as health-promoting groups have forced some changes in the way McDonald’s prepares its fast food, but there’s little doubt that eating there is still basically an unhealthy choice.

MCD stock certainly hasn’t been an unhealthy choice for shareholders, though. MCD stock has advanced 267% over the past ten years, right in step with earnings. Despite three straight months of falling same-store sales, MCD stock has held up quite nicely since October.

BP (BP)

BPPLCLogo Hate the Brand, Love the StockIn some ways you almost have to pity BP (BP[4]). Though it was the owner of the Deepwater Horizon drilling platform that ultimately caused the worst maritime oil spill ever, truth be told, it could have been any explorer that was in the wrong place at the wrong time on the wrong end of an accident.

Still, BP was the company in that place at that time, so it gets stuck with the fallout. To this day, though it’s been four years since the rig spilled 200 million gallons of oil into the Gulf of Mexico, the public remains less than pleased.

The public isn’t displeased enough to punish BP stock, however. Though shares plunged from $60 to a low near $27 as a result of the oil spill, BP stock has since fought its way back to about $50 per share. That’s a near-doubling of value for BP stock in less than four years following the environmental catastrophe.

Altria (MO)

altria Hate the Brand, Love the StockCigarettes smell bad. They stain your teeth. They can cause cancer. But they also make shareholders of their makers a ton of money. Though they all contribute equally to “the problem”, the easiest name to pick on among the cigarette producers is the prolific Altria (MO[5]).

Even being a target, however, hasn’t kept MO stock down. Since 1994, when the anti-smoking ball really got rolling, MO stock has advanced 745%, hitting new all-time highs near the end of last year.

Oh, and for what it’s worth, don’t worry about the statistics that suggest smoking is on the decline. The percentage of the world’s populous that smokes has fallen since 1980, but population growth has more than offset the dip in the total number of smokers[6]. That’s how Altria has managed to continue growing revenue, albeit slowly, in the face of health concerns.

Time Warner Cable (TWC)

Time Warner Cable Hate the Brand, Love the StockLast but not least, for the folks who have ever needed to contact customer service agents at Time Warner Cable (TWC[7]), they’ll know it’s almost always a miserable experience.

Even those Time Warner Cable customers who haven’t been forced to contact the company for repairs or questions, however, have likely been on the wrong end of the company’s lack of effort to provide a good product at a reasonable price. And make no mistake – the company really does consistently rank at or near the bottom of cable-television service surveys[8].

But could the impending union with[9] Comcast (CMCSA[10]) improve the Time Warner Cable customer service and perception issues? Doubtful. Comcast also consistently ranks well below average when it comes to cable television service satisfaction.

But just look at the numbers — TWC stock is up 152% since early 2007, when the company was spun off from Time Warner (TWX[11]). See, one of the upsides to having a legalized monopoly is that even though your customer service stinks, subscribers still have little choice but to fork over their money and buy your product. And from investors’ perspective, that’s a pretty good deal.

As of this writing, James Brumley did not hold a position in any of the aforementioned securities.

Endnotes:
  1. and the retailer isn’t even as price-competitive as it used to be: http://investorplace.com/2014/02/walmart-wmt-fdo-dg-discount-retailers/
  2. WMT: http://studio-5.financialcontent.com/investplace/quote?Symbol=WMT
  3. MCD: http://studio-5.financialcontent.com/investplace/quote?Symbol=MCD
  4. BP: http://studio-5.financialcontent.com/investplace/quote?Symbol=BP
  5. MO: http://studio-5.financialcontent.com/investplace/quote?Symbol=MO
  6. population growth has more than offset the dip in the total number of smokers: http://www.washington.edu/news/2014/01/08/despite-declines-in-smoking-rates-number-of-smokers-and-cigarettes-rises/
  7. TWC: http://studio-5.financialcontent.com/investplace/quote?Symbol=TWC
  8. the company really does consistently rank at or near the bottom of cable-television service surveys: http://qz.com/176883/a-comcast-time-warner-cable-deal-would-combine-two-of-americas-most-reviled-companies/#/h/47086,1/
  9. impending union with: http://investorplace.com/2014/02/will-comcast-cmcsa-time-warner-cable-twc-kill-tv/
  10. CMCSA: http://studio-5.financialcontent.com/investplace/quote?Symbol=CMCSA
  11. TWX: http://studio-5.financialcontent.com/investplace/quote?Symbol=TWX

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