There will always be companies that some people hate. The negative goodwill could result from the company’s underlying business, which is often the case with tobacco or firearm companies, or it could simply be a result of not liking the business or feeling that the company has violated its trust with its customers/users.
Whatever the reason, there is a great chance that there are some companies out there that you just simply cannot stand. This is normal, and while it is easy to put ethical restrictions on the securities you buy, sometimes you have to separate your feelings and realize that there are some companies you absolutely hate that have stocks you can love.
Take for example tobacco stocks. Tobacco is a leading killer, with most people either being directly impacted, or had close friends that were impacted in a majorly negative way. Tobacco companies for years denied their products had the addictive and harmful effects that they obviously did, so a lot of investors completely disregard the sector when looking for investments. Tobacco companies understand this, which is why they tend to have dividend programs that are almost too good to be true, and provide investors a tangible reason to love their stocks.
Tobacoo is just one example, whether its birth control, guns, military, gambling (just to name a few), there are sectors out there that fall into the “sin stock” category, which a lot of investors avoid.
For some investors, the ethical barrier to enter the above sectors proves too great to overcome, but for those investors that are willing to put their ethical objections aside, and look for stocks with a lot of potential, here are five companies you can hate while still loving their stock.
Few sectors get the negative reaction as tobacco. Tobacco companies are dealing with lower smoking rates, but even so sector leader Altria (MO) has managed to grow its earnings nicely in recent years, and is expected to continue showing growth in the future. Earnings are up 9.3% per annum over the last five years, and analysts forecast average annual earnings growth of 10.2% per year moving forward. The biggest reason to love Altria is its hefty dividend yield. The entire sector keeps its dividend high to keep investors interested regardless of ethical concerns, and MO’s yield currently sits at 4.3%. The stock has decent growth, a low trailing P/E of 12.0, and a nice dividend yield. There are plenty of reasons to love this stock. MO currently trades at $64.20, with an average price target of $76.73.
Some investors have serious problems investing in defense contractors such as Lockheed Martin (LMT). The unfortunate reality of the world is that political unrest will never end, and as such countries will continue to need Lockheed Martin in order to beef up and keep their militaries modernized. Lockheed Martin has grown earnings by 9.0% annually over the last five years and looking ahead analysts see 46.0% per annum earnings growth for the next five years. The stock has a forward P/E of 18.9 and is currently trading at $339.76. Analysts have an average price target of $386.38 on the stock. The stock has a 2.36% dividend yield.
Alcohol is another sector that a lot of investors shy away from for ethical reasons. While you may not like the idea of buying into an alcohol stock, you need to consider the defensiveness of the sector, as it tends to hold up much better when the overall market moves lower. Constellation Brands (STZ) has trended steadily higher over the last year and is currently trading just shy of its all-time high. The company has shown amazing growth in recent years, with profits rising 30.6% per annum over the last five years and is expected to grow earnings by an average 15.5% a year for the next five years. STZ is trading at $226.34, with an average price target o $248.25.
Social media leader Facebook (FB) has come under a lot of scrutiny in recent months, and the company’s founder and CEO, Mark Zuckerberg, is currently testifying in front of Congress. His testimony is regarding the company’s recent admission that upwards of 87 million of its users’ personal information was used against Facebook’s policies during the recent presidential election. People either love or hate the social media platform, but until recently investors have had no reason to do anything but love the stock. Facebook has a huge user base, and while some advertisers may reduce the amount of spending they do with Facebook, for the most part advertisers will continue to utilize the company’s huge user numbers. Facebook has admitted that it should have done more to protect its users information, and that heavy investments to make sure it gets it right moving forward will have an impact on the company’s overall profitability. Regardless of the short-term impact of beefing up its security, the long term outlook remains strong, and I would use the recent weakness as a good buying opportunity to jump into the stock. FB trades at $159.32, with an average price target of $216.56.
Gambling is another sector that a lot of investors hate. Wynn Resorts (WYNN) has been strong over the last year, with improvements in both Las Vegas and Macau working in the company’s favor. WYNN experienced 12.1% per annum earnings declines over the last five years, but looking ahead analysts see profits rising by 8.0% per year over the next five years. The stock has a favorable valuation, with a forward P/E of 20. WYNN trades at $183.07 with an average price target of $192.46.