A spike in Italian bond yields to levels not previously seen in the Euro zone sent global markets spiraling downward on Wednesday morning as uncertainty over the ability of a new government in Italy to tackle the country’s debt crisis frightened already skittish investors.
Banks and energy stocks led the S&P 500 lower at the open, with the Dow Jones Industrial Average off by more than 200 points in early Wednesday trading, going on to recover slightly from a brief 300 point decline in mid-day trading, only to close 389 points lower for the day.
Borrowing costs in Italy reached an astonishing 7.5%, which is a level that previously caused other European countries such as Portugal and Greece to seek bailouts from the IMF and the European Union and forced these nations out of credit markets. The concern is that Italy is too large of a nation to be bailed out.
Broad Market Sell Off Takes Out Shares Of GM And Others
Although Tuesday saw a broad market rally on the resignation of Italy’s Prime Minister Silvio Berlusconi, concerns over Italy overshadowed these gains on Wednesday. In addition, a political hiatus in Greece was prolonged even further due to the failure of a plan for Lucas Papademos, the former vice-president of the ECB, to lead the government in Greece to national unity.
Even better than expected profits reported by American car manufacturer General Motors couldn’t save share prices, as GM continued to trade lower by over 8% in mid-day trading. As investors dump stocks indiscriminately, it is time to look at possible long positions in some high quality stocks in the beverage sector.
While everyone else is panicking, it is wise to keep a cool head an search for ways to profit in this market. As the past few years have hopefully taught many of us, it is always better to wait for the best price, and shopping for stocks that are on sale can really be no different if you know where to look.
Two Beverage Companies: Many Ways To Profit
In today’s environment, the shares of two beverage companies, Anheuser Busch (BUD) and Coca Cola Enterprises (CCE), appear to offer investors several ways to profit in this volatile market. The first will be the opportunity to take advantage of lower share prices as a result of today’s broad market sell off. Anheuser Bush was trading over 2% lower by mid-day, and Coca Cola was also trading lower by over 2%.
As share prices fall, dividend yields rise, so the decline in share prices seen today – an lets face it, with more yet to come in the Italian debt crisis, more down days on the horizon – the greater the dividend yield. If you are considering this type of move into these securities, it may be best for you to initiate your position incrementally, with purchases made in stages as the share prices fall. This also helps you utilize the benefits of dollar-cost-averaging as an additional hedge against risk.
Both Anheuser Busch and Coca Cola Enterprises have the ability to withstand the impending market volatility due to their strong branding, market share, and global appeal. Anheuser Bush posted a 16% increase in profits for the third quarter, citing the success of their global brands Beck’s and Stella Artois.
Upbeat Third Quarter Sales Based On Global Appeal
Coca Cola Enterprises also saw an 11% increase in revenue, with the company’s CEO crediting superior execution, cost control measures and an increase in effectiveness. The company also stated that it remained committed to shareholders and will provide consistent and sustainable growth moving forward.
The industry giant also declared that it will be completing its present share repurchase plans, and will continue with a new $1billion program slated to begin in 2012.
When the dust settles in the European debt crisis, both of these corporate giants should fair well and offer investors ways to profit in this market. Their global appeal should well position these companies to continue profiting into the future with Anheuser Bush seeing an increase of 13.6% in China in the third quarter, and Coca Cola boasting an increase in revenue from Great Britain and continental Europe totaling over 2%.
Anheuser Bush and Coca Cola Enterprises could prove to be money making stocks in the days ahead, and both will pay you to wait for that day to come, making them excellent considerations for your investment portfolio.
