Sin stocks, especially those in tobacco industry, have been having a rocky year. Even marijuana stocks have come back down to earth, as the popular cannabis exchange-traded fund ETFMG Alternative Harvest ETF (NYSEARCA:MJ) has given back a lot of its gains from the first quarter of the year.
At one point in the year, MJ was up well over 40%. As of the time of this writing though, the ETF was still posting gains of 14% year-to-date, but remember that’s still an underperformance relative to the S&P 500.
The overall risk-on climate of the market does not completely favor the more defensive sin stocks, but there are bargains to be found across sectors. There are opportunities that should be seized when the market is looking elsewhere.
As always, being selective is the key to finding stocks to buy that are long-term winners.
Altria (NYSE:MO) has been hit with some regulatory headwinds. This is bound to happen in the tobacco industry, but Altria has always deftly navigated its way in such a manner that protects shareholder interests.
Shares of MO stock are now flat for the year, and yields are at 6.4%. This is a good time to take a position if you have been on the sidelines. Shares are trading at 13x earnings, so from a valuation and yield standpoint, there is a comfortable margin of safety to weather whatever second-quarter earnings may bring.
Regardless of what the market is doing, Altria continues to innovate and diversify its product line. MO recently announced that it had singed definitive agreements to acquire 80% ownership of certain companies that intend to commercialize on! — an oral tobacco-derived nicotine (TDN) pouch product — worldwide.
The company remains committed to diversifying its portfolio into faster growing categories, which is what you want to see. Altria is doing all the right things to get a nice bounce in the second half of the year.
Wynn Resorts (WYNN)
In the world of gambling, Wynn Resorts (NASDAQ:WYNN) is the gold standard both domestically in the U.S. and internationally. No one does glamour and luxury quite like the Las Vegas-based casino developer.
Despite a somewhat disappointing first quarter, shares of WYNN stock have come back significantly. Last month alone, shares surged 12% with help from improvements in the Macau market. For quite some time, the growth engine has been the Chinese gambler, forced to look beyond the mainland to indulge their gaming habits.
Looking ahead, while Macau will still remain the most important revenue geography in terms of total dollar amount, the market may reward growth in WYNN’s latest project, the Encore Boston Harbor. This is a sizable investment in New England, which isn’t a traditional gambling area. However, because of that fact, there is less competition, which could result in a higher-than-expected growth contribution.
The Encore Boston Harbor is a $2.6 billion five-star gaming resort with a serious amount of potential. There are over 671 hotel rooms complete with extensive dining and retail opportunities, leaving investors with good odds that WYNN has better quarters ahead.
Halliburton Company (NYSE:HAL) does not fall into the typical sin stock categories of tobacco, alcoholic beverages and casinos. While big oil and oil services companies do not obviously prey on human weakness, they do fuel our addiction to fossil fuels which does have an obvious negative impact on the larger environment. Exploitation is still occurring. From that angle, I include HAL in this group of sin stocks.
Haliburton stock has had a rough few months as of late. HAL shares are down 13% while the overall market, as measured by the S&P 500, has ticked up almost 20%. After this selloff, HAL trades at just twelve and a half times earnings. It is now too cheap to ignore. The dividend yield is also over the 3% mark, sweetening the value proposition.
This is a classic example of an overlooked company in a sector that has been out of favor. First-quarter earnings were notably strong, showing sequential improvement year-over-year. HAL delivered net income of $152 million or 17 cents per diluted share, in the first quarter, which was markedly higher than the $46 million or 5 cents per diluted share earned a year ago. Yet the market has chosen to overlook this.
Going into second-quarter earnings, there is lots of room to surprise to the upside with the stock trading so cheaply.
As of this writing, Luce Emerson was long shares of Altria.