Controversy Can Lead to a Selloff – The Question Is Whether or Not It Lasts

Sometimes a company makes a misstep that can cost it customers in the short term. Other times, a misstep can be more permanent in nature. The question is how each specific opportunity plays out.

  • Special: See What One Ticker... One Trade... EVERY WEEK...Can Do for YOU
  • Since each situation is different, it helps to look at the strength of the market reaction. And how competitors are faring as well. If a company faces trouble in a bear market, it may get overlooked. But it may also shine a favorable light on a competitor.

    Recently, Anheuser-Busch InBev (BUD) saw sales of Bud Light drop due to a recent advertising controversy. While shares have slid, they’re down just 10 percent from recent highs. That’s a sign the market sees events as more of a political or culture war issue than a financial one.

    Plus, shares of Molson Coors (TAP), a similar competitor, have about the same valuation right now, as both stocks are trading at about 16 times forward earnings.

    Action to take: Investors interested in the space may want to consider where their favorite brand is and go shopping from there, as both companies are inexpensive. For income investors, Molson Coors, with a 2.6 percent yield, offers a much higher dividend than Anheuser-Busch InBev.

  • Special: 1 New Trade. Each Week. 80% Win Rate Guarantee. Get the Details Here.
  • Traders can bet on either company continuing higher over time. Molson Coors does have better momentum at present, however. The October $65 calls, last going for about $3.10, offer mid-double-digit returns from a further rally here.

     

    Disclosure: The author of this article has no position in the companies mentioned here, and does not intend to trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.