Tuesday, December 6, 2011

"Most Hated Stock Delivers for Investors" (MO; VICEX)

From Street Authority via The Street:
I've written about this company several times before. I've personally owned it for years. But just about every time I mention it, I end up receiving nasty emails admonishing the fact that I would cover - let alone recommend -- investors own shares of this company.

In fact, it happens so often that I instruct our staff to put in a mention that this investment isn't for everyone whenever they cover it. If you don't want to invest in this stock, I can certainly understand. But if you have an open mind toward this black sheep, then you're likely to appreciate what it can do for you.
Simply take a look at its performance so far in 2011.

In a year marked by credit 
downgrades, the European debt crisis and stagnating growth, the most hated company on the planet -- Philip Morris International(PM_) -- is still making investors rich. And that comes when the broader market has been a roller coaster ride.

In fact, Philip Morris touched a new 52-week high on Nov. 30.

Unfortunately, I've noticed that more and more investors seem to be tricked into thinking investing has to be complicated. But stocks like Philip Morris prove that making money doesn't have to be hard.
Philip Morris doesn't have a complicated business model. It is simply one of the most dominant and shareholder-friendly companies on the planet. The company does business in 180 countries and owns seven of the world's top 15 global brands in its market.

But it has also made a mission of rewarding its shareholders. In the past three years alone, it has returned more than $12 billion in dividends while increasing the payments per share by 43%. Today, the shares pay a yield of more than 4%....MORE
This concept is nothing new to CI's loyal and long suffering readers. Here's our April 2011 update of an idea we first pitched in April 2007:
Sin Versus the S&P 500: Sin Wins! (VICEX)

A quasi-periodic look at the wages of sin.
Our headline is a play on the title of Richard Brautigan's 1968 poem The Pill Versus the Springhill Mine Disaster.
Springhill was the site of three different coal mining disasters, in 1891, 1956 and 1958, killing at least 238 miners.

We first examined the profit to be had by being naughty back in April 2007:
Moral Judgment On 'Sin Stocks' Means Higher Returns For Vice-Friendly Investors

...Prof. Hong lists his research interests as: 
"Asset pricing with less-than-fully-rational investors; differences of opinion, short-sales constraints and asset prices; social interaction and financial markets; career concerns, biased forecasts and security analysts; organization, performance and mutual funds; asset pricing with asymmetric information and other market imperfections."
Hey! Mine too!
Professor Hong has put together a pretty impressive c.v. including associate editor at the Journal of Finance and a Directorship of the American Finance Association. He hangs his hat at Princeton.

One proxy is the Vice fund, first mentioned in 2007 and again in 2008.
Here's the one year comparison chart, from Yahoo Finance:

Chart forVice (VICEX)

Here are the funds' holdings.
Here's the three year chart comparing VICEX with the S&P, the country's largest coal company (BTU) and the Wilderhill clean energy ETF (PBW). Over this time period VICEX trails the S&P but Peabody Energy decisively outperforms. Going out to five years, VICE is back on top: