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Investing in Sin Stocks

Written By Brian Hicks

Posted January 25, 2008

Truth told, further sell offs are imminent.

The Fed will attempt to prop up the economy with further rate cut aggression, met with a Bush Administration stimulus plan. But there’s no guarantee that either will snap the economic melee.

Does that mean you convert to the 100% cash under the mattress strategy? No.

There’s always a bull market somewhere, despite the tumultuous fear. During economic downturns investing in sin stocks is a wise move for investors. Here’s why…

A Few Good Reasons to Invest in Sin Stocks

Think about this.

Tough economic times won’t stop gamblers from gambling, drinkers (social and otherwise) from drinking, or smokers from smoking. It’s not going to happen. In fact, tough economics may give them more reason to indulge in smokes, drinks, and gambling – the catalysts for “sin” stocks.

During the fall of 2000-2002, for example, as the S&P 500 lost 47% of its value, “sin” related stocks, like Altria (MO) just about doubled, as others, such as Anheuser-Busch (BUD) tacked on 87% upside.


SP500 as compared to MO and BUD


Immediately following the 9/11 attacks, for example, the tobacco sector was an out-performer. A similar trend could be seen during the 1991 Persian Gulf War, too, proving that people will buy cigarettes and alcohol regardless of economic and political tensions.

Some Sin Stocks To Consider

We’re anticipating similar trends in our current economic downturn , and expect upside in the “sin” plays, such as:

  • Weapons-related stocks such as Smith & Wesson (SWHC:NASDAQ)
  • Alcohol-related companies such as Anheuser-Busch (BUD:NYSE)
  • Cigarette stocks such as Altria (MO:NYSE)
  • And even The Vice Fund (VICEX), which has holdings in companies like Altria, British American Tobacco, Diageo PLC, and SABMiller.

With the Vice Fund, for instance, you can argue that as economic disaster persists, this one makes more money. In fact, over the last year, the Fund tacked on 24% in value, as compared to 5.3% upside for the S&P 500.

To paraphrase Gordon Gekko, sin is good,

Ian L. Cooper