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Institutional investors, such as endowments and pension funds and mutual funds, are the main stockholders in this country. Many of them are charged with avoiding companies focused on alcohol, tobacco, firearms, or gambling, for the sake of political correctness. Since institutional demand for these stocks is lower than that for other companies, they historically trade at a lower P/E and pay higher dividends than the stock market at large. There is always money to be made on stocks of companies selling tobacco and alcohol (aka sin stocks). There is no mutual fund I know of focusing on these two segments only; but the Vice Fund (VICEX), which focuses on tobacco, alcohol, defense and gambling stocks, has doubled the return of the S&P 500 in the past five years. I will put morality aside and look at the most-representative sin stocks between tobacco and alcohol subsectors. I chose these five because, in my opinion, their historic risks are known and already-priced in


Anheuser-Busch InBev SA Sponsor (BUD)

BUD is listed on the NYSE and was trading recently at about $57 per share, near the midpoint of its 52 week range of from $64.53 to $39.05. Its market capitalization is about $91 billion, and its trailing P/E is 18.5. It pays an annual dividend of $0.97, for an annual yield of 1.7%.

BUD was formed when the old AB InBev acquired the old Anheuser-Busch company in November, 2008. BUD is the largest beer maker in the world. In the third quarter of 2011, BUD continued its pattern of late of declining unit sales with increasing profits. It achieves this largely by focusing on its higher margined products, and its overall profit margin is a solid 13%. BUD's third quarter, 2011 profit increased by 16% to $1.73 billion or $1.08 per share. As the former independent companies settle into one worldwide company,it seems that they will find a way to increase sales unit volumes.

BUD is the owner of 7 of the world's 15 leading beer brands. I believe BUD has ample growth potential. Jim Cramer recommends it, and so do I, for those with a multi year time horizon.
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