In this article, I will construct a portfolio of "unhealthy" stocks, which would make New York mayor Michael Bloomberg cringe! but the stocks could be good for your investment portfolio. For my article, I will look for large cap stocks, which pay a dividend and have grown earnings in the past year. I will look for companies in the following industries: soft drinks, alcoholic beverages, cigarettes, candy producers, and fast food restaurants. For my search, I will be using the Finviz.com stock screener. Below is my list of screener criteria that I used to find each stock for each industry.
- Market Cap: Large [over $10 Billion]
- EPS growth this year: Positive
- Dividend Yield: Positive
- Industry: Beverages-Soft Drinks, Beverages-Brewers, Cigarettes, Confectioners, and Restaurants.
For each industry, I will select the stock that has the largest market cap if there is more than one company that meets the above screener criteria.
Soft Drinks: For the soft drinks category, two stocks met the above screen criteria: Coca Cola (NYSE:KO), and Coca-Cola FEMSA, S.A.B. De C.V. (NYSE:KOF). Coca Cola has the largest market cap of the two so I included it in my portfolio.
Alcohol Beverages: For the alcoholic beverages category, two stocks met the above screen criteria: Anheuser-Busch Inbev SA/NV (NYSE:BUD) and Ambev - Companhia de Bebidas das Americas (ABV). Anheuser-Busch Inbev has the largest market cap of the two so I included it in my portfolio.
Cigarettes: For the cigarettes category, three stocks met the above screen criteria: British American Tobacco p.l.c. (NYSEMKT:BTI), Altria Group, Inc. (NYSE:MO), and Philip Morris International Inc. (NYSE:PM). Philip Morris International has the largest market cap of the three so I included it in my portfolio.
Confectioners: For the confectioner's category, only one stock met the above screen criteria: The Hershey Company (NYSE:HSY), so I included it in my portfolio.
Restaurants: For the restaurants category, two stocks met the above screen criteria: McDonald's Corporation (NYSE:MCD), and YUM! Brands, Inc. (NYSE:YUM). McDonald's has the largest market cap of the two so I included it in my portfolio.
[Data in the following table is from Finviz]
Anheuser Busch Inbev
The Coca-Cola Co
Philip Morris International Inc
The Hershey Co
For the historical performance of each stock, I will use the DRIP Returns calculator to calculate the total return for each stock compared to the SPDR S&P 500 Trust ETF (NYSEARCA:SPY) going back to the start of 2000 or as far back as the data goes, which is the case for BUD, and PM. As the following return data table shows all of the "unhealthy" stocks have greatly outperformed the S&P 500, which shows what is not necessarily good for your body can be good for your portfolio.
Average Annual Total Return
Average Annual Total Return
The following are short business descriptions from Yahoo Finance, for each company listed above.
Anheuser-Busch InBev: Anheuser-Busch InBev SA/NV, a brewing company, engages in the production, marketing, and distribution of beer in Latin America, North America, Europe, and the Asia pacific. The company offers a portfolio of approximately 200 beer brands. [Yahoo Finance]
Coca Cola: The Coca-Cola Company, a beverage company, engages in the manufacture, marketing, and sale of nonalcoholic beverages worldwide. The company primarily offers sparkling beverages and still beverages. Its sparkling beverages include nonalcoholic ready-to-drink beverages with carbonation, such as carbonated energy drinks, and carbonated waters and flavored waters. [Yahoo Finance]
Phillip Morris International: Philip Morris International Inc., through its subsidiaries, manufactures and sells cigarettes and other tobacco products. [Yahoo Finance]
Hershey: The Hershey Company, together with its subsidiaries, engages in manufacturing, marketing, selling, and distributing various chocolate and confectionery products, pantry items, and gum and mint refreshment products worldwide. [Yahoo Finance]
McDonald's: McDonald's Corporation franchises and operates McDonald's restaurants in the global restaurant industry. Its restaurants offer various food items, soft drinks, coffee, and other beverages. [Yahoo Finance]
Overall, the stocks in my portfolio above have performed very well compared to the S&P 500 over time, and I would expect them to continue doing so because of their stable businesses with strong cash flows, positive earnings growth, and dividend support. The data above shows that even companies that have products that have been singled out by politicians or other people/groups can still provide a good return for your portfolio.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.