Ladies and gentlemen, let me assure you that the sin trade is doing pretty well these days. If you’re willing to stop listening to the niggling objections your conscience might raise, you can manage to turn a pretty nice profit.

Your Profits go up in Smoke

Our first example is the British American Tobacco (Symbol: BTI). Currently their stock price sits at $65.45 a share right now. That price has fallen slightly from previous high of $79 a share, but it’s still pretty good. What makes this much, much more impressive is the recent poor performance of the economy. When most other companies are losing money, British American Tobacco’s manages to turn in a performance that is almost miraculous.

Another profitable company that deals in tobacco is Philip Morris (Symbol: PM) . They hold the reins of the infamous Marlboro cigarettes. Their stock price is currently $54.98 a share, capping off a year that, while turbulent, has ultimately been successful. They’ve increased their quarterly dividend to $0.54 per common share, which will be paid in October.

Lorillard (Symbol: LO) is yet another tobacco company whose stock is on the rise. They make Newport cigarettes, as well as Kent, Old Gold and Maverick. Their stock sits at an astounding $75.69 a share, rebounding after what appears to be a mediocre summer. Then again, Lorillard’s “mediocre” price point is $66 a share. Compare that with other major companies, such as Microsoft, whose stock sits at a mere $26.12 per share. I will leave it to the reader to decide which stock seems better.

The most interesting thing about these stocks is that they aren’t anomalies. Reynolds American (Symbol: RAI) has had a good year with their stock sitting at $51.57 a share. Ust(Symbol: UST) saw their stock price take a meteoric rise to $68.90 a share. Most of these tobacco companies are profit machines, with one or two exceptions.

Star Scientific (Symbol: STSI on NASDAQ) is one of these. Their stock is constantly in the single digits, and while their stock used to be around $6 a share, it’s lately closer to $4. It’s unique among its colleagues, a penny stock that has, for some reason, not profited the way its competitors have.

The second exception is the Altira Group (Symbol: MO), whose stock sank like a stone at the end of March. Their stock went from $73.83 to $22.20, and has stayed there ever since. Altira is looking to buy UST, which would put Altira well on the way to becoming the premier producer of smokeless tobacco in the industry. It sounds good on paper, at least, but I’d wait to see some sign of life in the stock before buying.

To Your Very Good (Financial) Health

The profitability of tobacco companies is mirrored by the profitability of beer companies. Anheuser-Busch (Symbol: BUD) has a very strong stock that was undoubtedly helped by the news of its merger with InBev. Its stock price currently sits at $68.07 a share, and while it may be starting to level off, It shows no sign of declining.

Molson Coors Brewing Company (Symbol: TAP) hasn’t been as profitable as Anheuser-Busch, but they’re working on it. Their stock actually resembles a roller-coaster ride more than a stock chart, but their current stock price is $48.55 a share, which is twice as profitable as it was around 2005-2006. It’d be an interesting stock to get if I had any brand loyalty to the beer. Otherwise, I’m just curious as to what the stock will do next.

Our final look into the world of beer is the Boston Beer Company (Symbol: SAM), maker of the famous Sam Adams ale. This company is the stereotype of a stock you want to buy. It has shown consistent growth from 2004 to the present, and it’s stock today is $44.29 a share…not bad, considering the stock’s high in a five-year chart was $53.90. This is a stock I’d feel confident recommending.

The fact that beer companies are profitable shouldn’t be surprising. The performance of tobacco companies’ stock, though, should make you wonder how they manage to be so profitable. It should especially make you wonder when you realize that most tobacco companies are facing various lawsuits, paying out judgments and seeing their product’s use increasingly restricted. This says something about the addictiveness of nicotine and about supply and demand. Still, business is business.

Here They Come to Save the Day

On the other hand, if you want to make a little money and feel like you’re making a difference in the world, there are stocks that can do that, too. Hasbro (Symbol: HAS) is still a strong stock, with its shares around $38.10. It’s currently working on a new line of games that teach children manners, such as how to listen, how to share and about all-around politeness. According to Jim Hambley, Hasbro’s vice president of marketing, they feel responsible for teaching kids social skills as well as academic skills.

American Apparel (Symbol: APP on AMEX) is another company. The garment makers earn $12.50 an hour, with incredible benefits such as health insurance, classes to help employees speak English and use computers, bus passes and housing assistance. Dov Charney, American Apparel’s president, is making sure his products don’t come from a sweatshop. The stock has sunk since a high in April, and it stands now at $9.65 a share.

Red Hat (Symbol: RHT) is another company with a social conscience. Its stock has been pretty strong for the past year or three, and right now it rests around $20 a share. What is truly unique is that Red Hat’s business philosophy depends on providing open source software, in other words software anybody can use. It’s a company that truly believes dominating the market is a bad thing, since it’ll cut down on other developers competing with Red Hat and strengthening the market as a whole. This is a belief most people on Wall Street place just below the one about the sleigh and the flying reindeer.

Admittedly, these stocks aren’t as profitable as those in the tobacco and alcohol industry. These companies with a social conscience have to deal with shareholders the same way alcohol and tobacco companies do, and let’s face it—shareholders aren’t too concerned with how “good” or “bad” a company is, so long as it turns a profit. That’s usually not a bad thing. On the other hand, it’s nice to see companies out there who are doing something to leave the world better than they found it. That they can turn a profit while doing this is a business trick that should grab any investor’s attention.

Chris Gottschalk
Analyst, Oxbury Research