7 Sin Stocks To Buy During The Coronavirus Shutdown

There’s no question Americans are facing unprecedented stresses these days. Data suggests some Americans are relying on vices such as alcohol, tobacco and cannabis to get through the health crisis. At the same time, gamblers have been driven online for the time being due to casino closures.

When times are good, people like to celebrate with a drink or a smoke or a roll of the dice. When times are hard, they turn to these activities as a distraction or a means of self-medication. Regardless of how you feel about the activities themselves, here are seven “sin stocks” to buy that Morningstar analysts say have significant upside.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Philip Morris International Inc. (NYSE: PM)” data-reactid=”21″>Philip Morris International Inc. (NYSE: PM)

Philip Morris is one of the largest global tobacco companies and holds nearly a 30% market share of the international cigarette and heated tobacco markets.

Analyst Philip Gorham says Marlboro customer loyalty is extremely high and Philip Morris has considerable pricing power. The company has a first-mover advantage in heated tobacco, but it remains to be seen whether or not heated tobacco can completely offset lost cigarette volumes over time. Gorham says a successful launch of iQOS in the U.S. would generate completely incremental revenue given the company currently has no U.S. products.

Philip Morris shares also pay a sizable 6.9% dividend.

Morningstar has a Buy rating and $98 price target for PM stock.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="See Also: 7 Best Cheap Stocks To Buy Or Sell ” data-reactid=”26″>See Also: 7 Best Cheap Stocks To Buy Or Sell

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Cronos Group Inc (NASDAQ: CRON)” data-reactid=”27″>Cronos Group Inc (NASDAQ: CRON)

Cronos is one of the “big four” Canadian legal producers of cannabis and owner of brands such as PEACE NATURALS, COVE and Lord Jones. Cronos reported impressive 180% revenue growth in the first quarter, but it also reported a $45 million operating loss.

Analyst Kristoffer Inton says write-downs associated with lower prices due to oversupply in the Canadian market were the cause of the loss. However, Inton says Cronos’ write-downs are shrinking, whereas other cannabis producers’ losses are growing. Morningstar is projecting Canadian cannabis demand will grow 20% annually over the next decade, and Cronos has the balance sheet to expand its market share.

Morningstar has a Buy rating and $8.50 fair value estimate for CRON stock.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Las Vegas Sands Corp. (NYSE: LVS)” data-reactid=”31″>Las Vegas Sands Corp. (NYSE: LVS)

Las Vegas Sands is an international casino operator that owns casino resorts and hotels in Las Vegas, Macau and Singapore. Analyst Dan Wasiolek says Macau and Singapore are the keys to the bull case for Las Vegas Sands.

Macau accounted for about 59% of Sands’ earnings in 2019, and Singapore was another 31%. Wasiolek says Sand’s has a dominant position in the high-growth Cotai Strip in Macau, and it has a duopoly in place in Singapore through at least 2030. COVID-19 shutdowns in Las Vegas and a 97% drop in gross gaming revenue due to COVID-19 may be scary, but Wasiolek estimates Las Vegas sands has 18 months of liquidity at nearly zero revenue.

Mornigstar has a Buy rating and $62 fair value estimate for LVS stock.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="British American Tobacco PLC (NYSE: BTI)” data-reactid=”35″>British American Tobacco PLC (NYSE: BTI)

British American Tobacco is an international tobacco company that owns brands such as Lucky Strike, Newport and Camel and generates 45% of its revenue from the U.S. market.

While cigarette volumes are likely in secular decline, Gorham says British American’s accelerated volume declines in fiscal 2019 may be particularly troubling to investors. However, he says the company may be best-positioned to capitalize on the next generation of tobacco products, including its Vype and Vuse vaping brands an Glo heated tobacco brand. Gorham says British American’s buyout of Reynolds American was a solid strategic move given its pricing power and the value of its assets.

Morningstar has a Buy rating and $59 target for BTI stock.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Anheuser Busch Inbev NV (NYSE: BUD)” data-reactid=”39″>Anheuser Busch Inbev NV (NYSE: BUD)

Anheuser Busch Inbev is the world’s largest brewer and owner of brands such as Budweiser, Beck’s and Corona.

Gorham says the worst of the downturn may be yet to come for Anheuser Busch, but the company has plenty of liquidity to navigate the crisis. In the longer term, he says the company’s near monopoly and cost advantages in developed markets make the stock a solid investment, and its potential for free cash flow generation isn’t fully priced in at current levels. Gorham projects volumes will fall 20% in the first half of 2020 and only 7% in the second half of the year.