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How to Profit From Wall Street's Biggest Gaffe in Decades

I was perusing the newswires a few weeks ago when the following Reuters news story headline all but physically grabbed my attention.

It stated: “Exclusive: Morgan Stanley Rebuilds in Commodities Trading.”

Most folks probably looked at this and tossed it off as just another of the endless machinations of Wall Street.

But I knew better…

  • Five High-Yield Sin Stocks to Buy to Capture Emerging Market Growth glass of cognac and cigarettes Tobacco. Fast Food. Alcohol. Gambling. These are some of humanity's favorite vices, which also happens to make them excellent investments. After all, doing things that are bad for you not only never goes out style, it's one of the world's most dependable growth markets. But there's a secret sauce that can make some 'sin stocks' even sexier...
  • The World's Two Best Sin Stocks: Diageo (NYSE: DEO) and Philip Morris International (NYSE: PM) The common misconception is that so-called "sin stocks" only perform well when the economy tanks.

    But the truth is that purveyors of alcohol and tobacco take their lumps during a recession just like everybody else.

    That was certainly true of the world's largest spirits company Diageo PLC (NYSE: DEO), which traded as low as $42 a share in 2008. Of course, the stock has more than doubled since then, closing Friday at $93.38.

    Shares of cigarette-maker Philip Morris International Inc. (NYSE: PM) have nearly doubled in the past two years, as well.

    Still, you don't have to worry if you missed either of those rallies because there's still plenty of room for these two sin stocks to run.

    Indeed, more and more consumers are returning to their vices as the global economy improves.

    For instance, liquor sales, which stagnated in 2009, rose 4% last year, while sales of top shelf spirits increased 5.3% -- a near return to pre-2008 levels.

    What's more is that these gains came at the expense of the beer market, which typically has the upper hand in tough economic times.

    "People who are doing well are going out and spending on spirits as an affordable luxury," John McDonnell, chief operating officer for The Patron Spirits Co. and chairman-elect of the Spirits Council, told Bloomberg. "Also, spirits companies never stopped spending through the downturn."

    The same goes for tobacco products, which have been gathering steam in emerging markets even while they fall out of fashion in developed countries like the United States.

    So let's take a closer look.

    Diageo is Uplifting Spirits

    Diageo - the company behind Baileys, Captain Morgan, Guinness, Smirnoff, and Johnnie Walker - is the most obvious beneficiary of increased liquor sales.

    These are powerful brands that helped Diageo actually increase its cash flow during the recession. And now that consumers worldwide are in a slightly more festive mood, sales are set to take off.

    Diageo, which produces about 28% of the spirits sold in the United States, reported a 5% increase in liquor sales in the U.S. and Canada in the second half of 2011.

    More importantly, the company continued to expand its business in emerging markets.

    While volumes were flat in North America and Europe, Diageo generated 14% volume growth in Latin America, 7% in Africa, and 5% in the Asia-Pacific region.

    And that's just the beginning for a company that has made developing markets the focus of its growth strategy.

    To continue reading, please click here...

  • Top Profit Plays for a Defensive-Investing Portfolio Prussian military theorist Carl von Clausewitz once said that "the best defense is a good offense." Although that bit of wisdom has been used everywhere from the battlefield to the gridiron, it could just as easily be deployed as part of a "defensive investing" strategy.

    And in today's markets - whipsawed by worries emanating from virtually every major market around the globe - a defensive-investing plan needs to include protective stops, inverse funds, high-yielding dividend shares, "sin stocks, and investments in oil and other value-storing commodities," Keith Fitz-Gerald, the best-selling author who is Money Morning's chief investment strategist, said in an interview this week.

    With the world markets in flux, Fitz-Gerald sat down with Money Morning Executive Editor William Patalon III to talk about defensive-investing strategies. What follows is the full text of that interview.

    For the full text of the interview, please read on... Read More...
  • Buy, Sell or Hold: Altria Group Inc. (NYSE: MO) – The 'Sin Stock' You Have to Own With more than 1 billion smokers worldwide, it is hard to conceive that companies selling cigarettes would not be extremely profitable. In addition, the majority of people who are smokers also tend to be alcohol consumers. One company that services both of these vices is Altria Group Inc. (NYSE: MO).

    Altria Group is a holding company; its wholly owned subsidiaries consist of Phillip Morris USA Inc., U.S. Smokeless Tobacco Co. (prior to 2001 it was known as United States Tobacco Inc.), John Middleton Co. and Phillip Morris Capital Corp.

    On Jan. 6 2009, Altria Group purchased UST Inc. in a $10 billion deal that gave the maker of Marlboro cigarettes an entre into the "smokeless tobacco" market, thanks to UST's ownership of the Skoal and Copenhagen brands.

  • A Year After the Bear-Market Bottom, Investors Must Still Pursue Profits – Without Ignoring Risk With the Standard & Poor's 500 Index up nearly 70% from the post-financial-crash low it set on March 9, 2009, U.S. stocks on Tuesday recorded their second-strongest showing ever for the first 12 months of a bull market.

    But that near-record-setting performance brings to light two key issues.

    • First, despite the numbers that stand as evidence of the market's stunning surge, many still-shell-shocked investors refuse to label this as a true "bull market."
    • And second, no matter how great a market's performance has been, the real question to answer is "where do we go from here ... and how do I position myself to maximize possible returns while mitigating risk as much as possible?"
    Money Morning turned to several experts - including Money Morning Chief Investment Strategist Keith Fitz-Gerald, and respected market researcher Bespoke Investment Group LLC - for some perspective on both these topics.