The housing industry is closely tied to many other industries including finance, home-improvement, machine tools, etc. When the construction industry booms all these industries experience a boom. After the credit crisis most of these industries suffered heavily as consumers cut back on renovations and the housing market tanked badly. As the housing market has stabilized and is slowly recovering, all these industries are showing signs of life.

According to an article in the Journal, as the residential market recovers many companies are enjoying strong sales. From “From Power Tools to Carpets, Housing Recovery Signs Mount“:

The U.S. housing recovery is starting to show up in corporate results.

Companies that sell power tools, air conditioners, carpet fibers, furniture and cement mixers are reporting stronger sales for the fourth quarter, providing further evidence that a turnaround in the housing market is taking hold.The results add to data on home construction and pricing that indicate a bottom may have been reached after the sector’s long slide. While the incoming data continue to be mixed, evidence that Americans are spending more to build and refurbish homes is raising executives’ confidence that the housing market will continue to improve and help fuel the broader economy.

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However caution is warranted as many of the housing-related stocks have already shot up in anticipation of the recovery. Hence these stocks may actually fall as the recovery becomes stronger. From another article in the Journal:

Since August 2011, the Philadelphia Housing Sector index of U.S. home-building stocks has jumped about 140%, while the Standard & Poor’s 500-stock index is up about 30%. U.S. house prices overall have risen by less than 10%.

Housing stocks have clearly run up too high too fast. So from an investment perspective, it is better to avoid stocks directly related to housing such as home builders, home improvement companies, etc. Banks may provide one option to profit from the recovery as their earnings are broadly diversified.

Companies that produce and sell alcohol, operates casinos and sell tobacco products are called as “Sin” stocks. In this sector, tobacco stocks usually have high dividend yields and steady growth. Tobacco companies make high profit margins and their products generally sell well despite high taxes as people become addicted to them.

Casino stocks are volatile and their performance is highly related to the state of the economy. Beer and other alcohol product sales tend to be more stable even in recessions and go higher when the economy is in expansion mode. One reason for this could be that prices of beer for example are relatively cheap and consumers are able to afford it even in recessions.

XX sin stocks trading on the markets are listed below with their current dividend yields:

1.Company: Lorillard Inc (LO)
Current Dividend Yield: 5.21%
Sector: Tobacco

2.Company: Altria Group Inc (MO)
Current Dividend Yield: 5.26%
Sector: Tobacco

3.Company: Reynolds American Inc (RAI)
Current Dividend Yield: 5.38%
Sector: Tobacco

4.Company: Molson Coors Brewing Co (TAP)
Current Dividend Yield: 2.84%
Sector: Beverages (Alcoholic)

5.Company: Constellation Brands Inc (STZ)
Current Dividend Yield: No dividends paid
Sector: Beverages (Alcoholic)

6.Company: Las Vegas Sands Corp (LVS)
Current Dividend Yield: 1.90%
Sector: Casinos & Gaming

7.Company: MGM Resorts International (MGM)
Current Dividend Yield: No dividends paid
Sector: Casinos & Gaming

8.Company: Wynn Resorts Ltd (WYNN)
Current Dividend Yield: 1.61%
Sector: Casinos & Gaming

9.Company: Beam Inc (BEAM)
Current Dividend Yield: 1.45%
Sector: Beverages (Alcoholic)

10.Company: Brown Forman Corp (BF-B)
Current Dividend Yield: 1.57%
Sector: Beverages (Alcoholic)

Note: Dividend yields noted are as of Jan 25, 2013

Beam increased its dividends by 10% when it reported the latest earnings last week. Brown Forman is the owner of the world famous Jack Daniel’s Tennessee Whiskey brand.

Disclosure: No Positions

Emerging market economies grew faster than developed world economies for many years now and this trend is projected to continue for the foreseeable future. For example, this year the U.S. economy is estimated to grow by just under 2%. Compared to this low growth rate, the GDPs of Brazil, China and India are forecast to grow by around 3%, 8% and 6% respectively.

One of the key sectors to benefi from the higher economic growth in emerging markets is the consumer-products sector. This is because the rising middle class consumers in these markets yearn for consumer goods such as tooth paste, household cleaning products, health and beauty products, appliances, instant foods, etc. Unlike the saturated markets of developed countries, the consumption culture is in the early stages of explosive growth in emerging countries. Companies that are able to understand the dynamics of these markets and successfully cater to the demands of the consumers are bound to profit from the growth.

Many western multinational consumer-goods firms already have strong presence in emerging markets. In this post let me discuss six such multinationals based on an article in a recent issue of Bloomberg BusinessWeek.

From “In Emerging Markets, Unilever Finds a Passport to Profit” :

From the markets of Southeast Asia to the aisles of American supercenters, that message is spreading. The Anglo-Dutch maker of household staples such as Dove soap and Lipton tea has accelerated its sales growth, new-product development, and presence in emerging markets over the past three years while many of its rivals in the $7 trillion consumer-goods sector, Procter & Gamble (PG) in particular, are struggling amid the prolonged economic downturn. “It’s Unilever’s moment in the sun,” says Harold Thompson, a Deutsche Bank (DB) analyst who has spent a decade following the company, which sells 400 brands in 190 countries.

Unilever’s newfound luster—its sales are growing at more than double the rate of P&G’s—comes courtesy of emerging markets such as Indonesia, which comprise 55 percent of sales, up from just 20 percent in 1990. That’s a higher proportion than at peers like P&G, France’s L’Oréal (OR), Swiss-based Nestlé (NESN), Germany’s Beiersdorf (BEI), and Britain’s Reckitt Benckiser (RB/). In the third quarter, Unilever’s emerging-market sales rose 12.1 percent, its sixth consecutive quarter of double-digit gains.

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Source: In Emerging Markets, Unilever Finds a Passport to Profit, Bloomberg BusinessWeek

The the tickers on the US markets for the above firms and the current dividend yields are listed below:

1.Company: Unilever PLC (UL)
Current Dividend Yield: 3.11%
Country: UK

2.Company: Unilever NV (UN)
Current Dividend Yield: 3.10%
Country: The Netherlands

3.Company: Danone SA (DANOY)
Current Dividend Yield: 2.54%
Country: France

4.Company: Reckitt Benckiser Group PLC (RBGLY)
Current Dividend Yield: 2.92%
Country: UK

5.Company: Procter & Gamble Co (PG)
Current Dividend Yield: 3.00%
Country: USA

6.Company: L’Oreal SA (LRLCY)
Current Dividend Yield: 1.72%
Country: France

Note: Dividend yields noted are as of Jan 30, 2013

Among the companies note above, Unilever has the highest sales from emerging markets. The company owns more than 400 brands including Lifebuoy, Sunlight, Lipton and Pond’s and 12 of those brands generates sales in excess of €1 billion a year.

Some of the top brands of Danone include Activia and Oikos yougurt, and Evian mineral water.UK-based Reckitt Benckiser Group is the owner of many popular global brands such as Calgon, Air Wick, Dettol, Clearasil, Durex, etc.

For over 140 years Swiss-based Nestle has been a top innovator and maker of high quality consumer products.Nestle’s brand portfolio include well-known brands such as Kitkat, Toll House, Gerber, Milo, NesCafe, etc.The company is also having a strong growth in its water business in China.

Cincinatti,Ohio-based Procter & Gamble Co has 50 leaderships brands which generate 90% of its sales and more than 90% of the profits. Pantene, Mach 3, Scope, Pert, Crest, Ariel, Vicks are some of P&G’s brands.

The cosmetics leader L’Oreal had sales of over €20.3 billion in 2011.The company sells over 27 brands in 130 countries.

Disclosure: Long RBGLY