There’s a proverb that states idle hands are the devil’s workshop, which makes sin stocks so compelling. Humans engage in certain practices, whether that involves imbibing or gambling as a means to let off some steam.
Yes, the concept undergirding sin stocks is controversial. I don’t think there’s any way of getting around this reality. Not surprisingly, many ethical portfolios avoid enterprises that cover areas such as alcohol, tobacco and gambling, among other “vices.”
Still, there’s another argument that states knowledgeable, consenting adults can live their lives how they please. And in the world of progressive equality, it’s not up to us how other consumers wish to spend their resources. On that note, below are sin stocks to consider.
Anheuser-Busch (BUD)
Despite the controversy surrounding Anheuser-Busch (NYSE:BUD), the beer and beverage producer and distributor represents one of the more compelling sin stocks to consider. Sure, a promotion featuring a social media influencer angered many people with conservative values. The concept centered on people not wanting to have corporations shove “woke” ideologies down their throats.
However, the reality is that Anheuser-Busch – particularly its now controversial Bud Light brand – is possibly more relevant than ever. Economically, a huge concern for everyday American households is inflation: it’s stickier than experts previously anticipated. Further, with soaring energy prices likely to continue rising due to the geopolitical backdrop, inflation may worsen.
I don’t want to get political but that’s probably bad news for anyone wanting to beat this expired horse. Analysts rate BUD a consensus moderate buy with a $74.25 average price target, which implies over 23% upside potential. That makes sense because Anheuser-Busch specializes in cheap beer – and people could use exactly that under the circumstances.
Bottom line, it’s one of the sin stocks to buy.
MGM Resorts (MGM)
Hospitality and entertainment giant MGM Resorts (NYSE:MGM) presents an intriguing angle for sin stocks to buy. With the economic challenges facing consumers, MGM appears risky. Therefore, it’s not particularly surprising that it’s undervalued on paper. Shares trade for only 13.56X trailing-year earnings and 0.95X trailing-year revenue. Both stats are below sector averages of 19.33X and 1.59X, respectively.
Still, one of the dangers of buying securities based simply on whether they appear undervalued or not centers on the valuation trap risk. It could be discounted but for a reason – typically not a good one. However, that might not be the case for MGM stock. Fundamentally, consumers may prioritize experiential expenditures. If so, that could be a boost for the broader travel industry.
Just as importantly, the most optimistic target for earnings per share lands at $3.41, well above last year’s print of $2.67. Further, the high-side revenue forecast calls for $17.39 billion, up significantly from 2023’s haul of $16.16 billion.
It’s no guarantee, of course, that travel prioritization will materialize. If it does, though, MGM should be on your radar.
Philip Morris (PM)
Tobacco companies like Philip Morris (NYSE:PM) present a tricky narrative. Yes, you can always talk about the fans of tobacco products, of which there are many. However, global smoking prevalence rates have declined. As well, multiple jurisdictions have placed restrictions on public smoking. It’s just not an acceptable behavior today as it was decades ago.
Nevertheless, PM deserves to be on your radar for sin stocks to consider. Fundamentally, that’s because Philip Morris (and others) have been pivoting to e-cigarettes and vaporizers. And this broad segment features myriad product subcategories, such as heat-not-burn devices. When you consider the “digital” alternatives, the tobacco industry appears very compelling.
Wall Street experts are aware of the burgeoning trend. For fiscal 2024, they’re anticipating EPS of $6.35, an improvement over last year’s print of $6.01. On the top line, they’re projecting sales of $36.99 billion, up 4.9% from 2023’s tally of $35.25 billion.
Finally, PM stock features a moderate buy consensus view with a $102.50 price target. Don’t forget the forward dividend yield of 5.32%, which makes for a holistically solid package.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
