“Profit from Al Capone’s Legacy” Xcelerated Profits

By Travis Johnson, Stock Gumshoe, August 11, 2008

This is the first we’ve heard in a couple months from the folks at Xcelerated Profits, the newsletter run by Karim Rahemtulla from the Agora/Oxford/Mt. Vernon megaplex in Baltimore, and he’s apparently spent that time wisely building a big ‘ol sales letter that teases a bunch of companies and includes some fun Al Capone history.

Good stuff.

And no, this is not a tax evasion teaser — I must admit, that was my first thought when I saw that we were looking for “Al Capone’s Legacy,” I figured we’d be trying to evade the IRS.

No, this is a bit more simple — profiting from the same kinds of things that made Al Capone rich, mostly booze, cigarettes, and gambling. Of course, the competition was a bit more limited then, since it was all illegal, but certainly those are all still very profitable “sin” businesses these days.

And though I’ve noted before that I won’t personally buy tobacco stocks, that doesn’t mean I shy away from all “sin” stocks — I’m a big fan of gambling and gambling stocks in general (though clearly they’ve been clobbered this year), and I have no complaints about investing in the firms that brew, distill and age the delicious intoxicating beverages that I enjoy from time to time. And I’m very happy that I don’t have to go down to the docks to buy bathtub whiskey out of the back of a speedboat.

So let’s find out what these companies are, shall we? The first one has the clearest connection to Capone, so we’ll start with that.

Why Capone? Because he was rich, of course … here’s how they whet our appetites:

“Estimates of Capone’s personal income exceed $20,000,000 a year.

“In today’s dollars, his income would exceed $242,000,000 per year. Yet according to FBI records, “Scarface” died virtually penniless.

“Over the next five minutes, you’ll discover where his missing money is being held. And for the first time ever, I’ll reveal how a handful of Americans are now collecting monthly checks from the fortune he left behind.

“As USA Today reports, “60 years after his death, they still can’t run him out of town.”

“It’s a thrilling tale of gangland derring-do. And it comes with a surprise twist: One that could put an extra $15,945 in your bank account each month starting days from now.”

OK, so the “still can’t run him out of town” quote from USA Today is actually from an article about how Chicago doesn’t much like gangster-themed tourism … but we get the point. Capone made a bunch of money from his illegal enterprises … and some of those enterprises are legal now, and maybe you can make money from them.

The first stock Karim Rahemtulla thinks you should buy to profit from “sin” is one that Capone actually had a small connection with … here’s that story, in copywriter-speak:

“… a young man from the Midwest, whose business was thriving before Prohibition, was determined to succeed.

“His savings were dwindling quickly… cash was needed, fast. So he turned to the richest, most powerful figure in the history of American booze… and asked for an infusion of money…

“Capone, smelling opportunity, was glad to oblige. But he couldn’t just transfer funds from his “gangster bank account” into his new partners’ business… where it would be easy to trace… and to tax.

“So how did Capone filter the money to his booze-producing buddy?

“Simple. He moved the cash through an entirely legal, “unrelated” transaction more than 1,000 miles away from Chicago… in a picturesque little Florida town called Palm Island….

“There, Capone’s partner owned a beautiful fourteen room villa, with a gatehouse and 300 feet of water frontage in an enclave of waterfront homes in Biscayne Bay, just minutes from Miami Beach.

“It was the perfect place for a gangster from Chicago to safely “lay low”… and to hide a huge, secret investment in a booze business that would eventually be worth millions of dollars…”

OK, so this was actually a pretty good story … even if it’s probably an exaggeration. The man who built that mansion was Clarence Busch, of the famous beer family, but what I’ve read suggests that he didn’t actually sell it to Capone, it was owned by someone else at the time. And if there was any direct relationship between Capone and the Busch family I don’t know it … still, it’s a good story.

So this company, you will not be surprised to hear, is Anheuser Busch (BUD)

And Rahemtulla waxes eloquent about the stock …

“Not only did it survive thanks to Capone’s covert cash infusion…

“It still operates today, churning out booze by the thousands of gallons. Following Capone’s business model perfectly, it caters to a market that doesn’t rise or fall depending on the economy… In fact, this business does particularly well when times are tough.

“And it’s about to make a handful of investor’s very rich…

“It’s Like Owning Your Own Cash Machine

“Amid the toughest markets in decades, Capone’s forgotten booze business is paying out a non-stop river of cash to investors…

“It’s no wonder the world’s best investor is a major shareholder. He understands Capone’s recipe for success too. His holdings are worth an estimated $2 billion and he receives annual payouts of over $45 million.”

That “world’s best investor,” of course, is Warren Buffett, who always has a soft spot for downtrodden brand names and who bought a sizable position in BUD a couple years ago.

But what is not mentioned anywhere, of course, is that BUD is about to go out of existence — they’re being bought out by InBev, the Belgian brewer, so if you buy BUD shares now you’re essentially engaging in a bit of merger arbitrage … the shares will probably be worth a touch more when (if) the deal closes, probably near the end of the year, but most folks would not be willing to pay anywhere near this much for BUD shares if they were not being taken over. The shares trade with a nice built-in acquisition premium, and if the takeover falls apart due to regulatory concerns or anything else, BUD shares could fall hard.

Personally, I’m not crazy about buying a company of this scale — though I do like InBev more than BUD. Both are massive, and beer consumption is going up in many countries, so they’ll probably do well in the long term. But InBev paid a LOT for Anheuser Busch, which has a pretty tepid rate of growth, so they’re going to have to either use BUD’s distribution in the US to boost their other products or expand BUD’s reach internationally to make this acquisition pay off. They report earnings shortly if they haven’t reported already, analysts expect them to grow, but not particularly quickly.

On to our other sin stocks in another writeup later today — and no, I regret to inform you, we will not be moving beyond booze, tobacco and gambling to incorporate a prostitution investment. That part of Capone’s legacy appears to be safely removed from the public markets … so far, at least.

Oh, and if you’re interested in beer stocks, there was one (SAM, an old Navellier pick from last year) that hit a buy signal from Carrot Trader last week, and it has been off to the races so far today.


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11 Comments on "“Profit from Al Capone’s Legacy” Xcelerated Profits"

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Pete Ewing
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Pete Ewing
August 11, 2008 2:06 pm

Travis,

You can always expand your sin investments by buying into the consolidation of strip bars (excuse me, gentlemen’s clubs) via Rick’s Caberet ! Nasdaq:RICK .

~Pete

josh
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josh
August 11, 2008 6:27 pm

hope your other writeup is about a gambling stock…i LOVE this sector and typically carry a good amount of these in my portfolio…however I sold all back in February due to the sector getting hammered.

On a side note, does anyone have any opinion on MPEL (or any Macau gaming stock for that matter)? I was in Macau in June and US companies are building new casinos left and right…(ie, a new Wynn and Venetian are two that come to mind). Vegas is placing bets on this place and I’m trying to join them on the right side.

Thanks for the site.

farley 5
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farley 5
August 11, 2008 7:42 pm

Sorry about your MPEL. Gave us plenty of time to get out at the tripple bottom $10.50 after the double bottom at $11.50.

http://stockcharts.com/def/servlet/SC.pnf?c=mpel,P

Gaming is an unfavored sector. If you must be in gaming right now, DYODD on the top ranked stocks,

Big Mo
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Big Mo
August 11, 2008 8:33 pm

Beer sales are strong in good times and bad. When people get laid off, they often sit home and drink beer. Maybe it’s as close to recession-proof as you can get.

destry
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destry
August 12, 2008 6:29 am
That’s true of alcohol sales in general, “Big Mo”; However nothing is recessionproof initially. The good is dumped with the bad for a variety of reasons…Recession proof just that certain stocks don’t go down as much…And/or, recover faster, and are consumer staples, and the like. As to gaming…I’ve decided I don’t know enough to invest in it…Maybe I get the feeling that there is a lot of “creative accounting” involved. As to MPEL…It appears ideal…But it never seems to go the distance…Maybe it’s the quintisential example of why one should always invest at arms length with the Chinese. Personally, I… Read more »
farley 5
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farley 5
August 11, 2008 2:44 pm

Our Fearless leader said: “profiting from the same kinds of things that made Al Capone rich, mostly booze, cigarettes, and gambling.” Anyone that works for a company named Booz is A-OK in my book!

DHS
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DHS
August 11, 2008 3:46 pm

Bot it in 2 bunches in Jan. 2005 at $4.40 and 4.20. Sold it in disgust in March 2005 at $3.16. Today I can buy it again at 14.37.

No thanks. But what do I know?

Todd
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Todd
August 11, 2008 6:52 pm

Well, if you don’t want to buy RICK that high, there is always VCGH and SCRH.OB…

farley 5
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farley 5
August 11, 2008 7:43 pm

WYNN, MGAM, SGMS

josh
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josh
August 11, 2008 8:48 pm

thanks Farley…MPEL has taken a beating…they release earnings on Thurs, probably another Q loss.

josh
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josh
August 12, 2008 2:55 pm

it’s not a matter or IF with state-of-the-art gaming in Singapore, but a matter of WHEN…

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