On July 4th, we celebrate our national independence and personal freedom by indulging in an orgy of self-destructive behavior. We eat too much grilled meat. We drink too much booze, beer and wine. We smoke like fiends. We blow off our fingers. It's a great weekend to be bad.

In keeping with the reckless spirit of the holiday, here's a stock portfolio for patriots who don't mind profiting from the unhealthy habits and wretched excess of others. We are talking chewing tobacco, red meat and liquor.

UST: Chaw, Anyone?

UST

(UST) - Get Report

-- that's U for United, S for States and T for Tobacco -- dominates the market for snuff and chewing tobacco with its

Copenhagen

and

Skoal

brands. It also markets

Chateau Ste. Michelle

,

Columbia Crest

and

Villa Mt. Eden

wines, as well as sparkling wine produced under the

Domaine Ste. Michelle

label. The portfolio also includes premium cigars including

Don Tomas

,

Don Tomas Special Edition

,

Astral

and

Habano Primero

.

UST is by far the No. 1 chewing tobacco maker. It has huge cash flow -- the markup on chaw is excellent. It has great brand loyalty among customers who love the nicotine fix. It has a new top management, including a former top brand manager from pickle-maker

Vlasic Foods International

and its

Swanson Frozen Food

division. (It all goes in the mouth, right?)

At 15 a share, UST is screamingly cheap. It has fallen about 40% year-to-date, although it hasn't declined since bottoming in late March. (The stock trades near its all-time low, having peaked way back in December 1997!) The price-to-earnings ratio is 5.5. Its price-to-cash-flow ratio is 5. The stock yields $1.76. The market cap is about $2.5 billion, which isn't much for a company that shows sales of $1.5 billion last year.

A bunch of smart professional investors have piled into the stock. For instance, former

Fidelity Magellan

manager Jeff Vinik, who continues his gunslinging ways as a hedge fund manager, owned UST as of March 31.

UST has a few warts, of course. Why else would it be so cheap? A jury in Kentucky found that UST violated antitrust laws when competing against a smaller market player and the judge in the case awarded the competitor $1 billion in damages. The company plans to appeal.

UST's stock price also suffers from ill effects of health and tobacco litigation. Chewing tobacco, which the company calls "moist smokeless tobacco" and its enemies call "spit tobacco," may or may not cause oral cancer. But at a time when investors have shunned cigarette companies in the gun sights of the plaintiffs bar, UST has also been given the cold shoulder.

The company, along with its boosters on Wall Street, says it has a

far lower litigation profile than the cigarette companies. It notes that while there have been about 2,000 cases filed against cigarette companies since 1954, only 20 have been launched against chewing tobacco makers. The company says that one case went to trial in 1986 and a jury returned a unanimous verdict in favor of UST's chewing tobacco subsidiary.

Says one top value investor, who loves the stock but prefers not to make his money from a product that may cause cancer: "They have liability exposure but less so than cigarette companies, because the link between oral cancer and chewing tobacco is not as clear cut as the link between cigarettes and cancer."

Morton's: Gargantuan Steaks, Tiny P/E

If tobacco isn't your poison of choice, how about red meat and lobster with melted butter? That's what serves up the profits at

Morton's Restaurant Group

(MRG)

.

Through its chain of 50

Morton's of Chicago

steakhouses, the company specializes in artery-clogging 24- and 48-ounce porterhouse steaks. It also offers the kind of food theater that most folks love -- and drives the folks at

People for the Ethical Treatment of Animals crazy. If you order a lobster, the waiter brings the live creature to your table before they cook it.

Morton's is wonderfully successful at this

Dean Martin

type of dining experience. The company caters to the high-end business exec; the average per-person check is $60 to $70. Profits have grown on average 24% a year for the past five years, according to

Baseline

.

"Morton's is clearly one of the strongest franchises in the restaurant business, given the 13 years of

same-store sales growth," says a recent report from

Robertson Stephens

(which discloses no investment banking relationship with the company).

The stock trades for a very democratic 10 times 2000 earnings and 9 times estimated 2001 earnings. It has been buying back stock. Robbie Stephens thinks the stock is "undervalued" and rewards Morton's with a strong buy rating.

Diageo: Plenty to Eat, but the Drinks Are the Thing

But what would the 4th be without booze, beer, burgers and buns?

Diageo

(DEO) - Get Report

offers all of the above. (OK, so maybe it's not patriotic on Independence Day to invest in a Brit company, but let's get global. It has been, after all, almost 224 years since we kicked the redcoats out.)

Diageo was formed by the 1998 merger of

Grand Metropolitan

and

Guinness

, two worldwide powers in the liquor and beer businesses. Whether you quaff Guinness stout or

Harp

or

Red Stripe

lagers, or sip

Smirnoff

vodka,

Johnnie Walker

scotch whisky,

Gordon's

gin or

Bailey's Irish Cream

liqueur, you are buying from Diageo. You might also run into the company if you eat

Pillsbury

refrigerated baked goods,

Green Giant

vegetables,

Old El Paso

Mexican food,

Progresso

soups or

Totino's

pizza.

And every time you drive up to a

Burger King

to have it your way, you pay Diageo. So far, this has not redounded to the benefit of shareholders. The burger business is not nearly as profitable as the booze business. And Burger King's mostly U.S. franchisees have long been unhappy being a small part of a London-based global conglomerate.

The company's postmerger shakedown cruise may be ending, according to Diageo management and some Wall Street analysts who think the company is at last reaching cruising speed. Recently, the stock has risen a bit in response to the announcement by the company that it plans an IPO of Burger King on the

New York Stock Exchange and will bring in fresh management to run the burger company. The IPO could bring in as much as $500 million to Diageo, according to Wall Street analysts.

Bottom line, Diageo is a play on booze.

Sanford C. Bernstein

noted in a recent research report on the company, "The reason to own Diageo is its spirits franchise, which is 2-3 times the size of its nearest competitor and where accelerating revenue growth, better mix and favorable pricing conditions conspire to boost earnings growth."

The stock has risen about 9% so far this year after bottoming in mid-March. It trades at about 13 times trailing earnings before interest and taxes. With the spirits business improving and price-cutting lessening, Diageo could produce some relatively cheap thrills for investors.

Happy 4th!