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Sin Stocks - Do they Really Make Money and are They Appropriate to Invest?

By Edited Mar 20, 2016 0 0

What are Sin Stocks?

Who's definition is Right and Why Does it Matter?

Sin stocks are identified as stocks related to an industry traditionally equated with a 'sin' or faux pas in society. The most common forms of sin stocks would be those in the alcohol, cigarettes and gambling industries. These are often very stable companies with a long list of clientage that is unaffected by politics, economics or class. They are also long standing companies, many of which have existed in one form or another since the turn of the century.

In recent years more inclusion has been brought to the sin stock category. Such companies that provide adult entertainment like Playboy fit into such a category. Likewise, sin stocks even constitute companies that indulge in risky behaviors or those which provide pleasure and comfort in excess.

Even more recently stocks whose company's are not socially responsible (SRI) are dubbed as sin stocks, such as those involved in fracking, developing world mining, and the destruction of natural resources.

This has become a point of contention though as one persons sin stock is perfectly acceptable to another. Consider endowment funds from on Catholic institution and one Islamic academy. Both are going to view very separate companies as sinful. Similarly, different political parties can be passionately against one company. A great example would be the Green Party of Canada opposing oil pipelines. The Conservative Party would disagree on the classification of these as sin stocks.

Alcohol has always been considered a Sin Stock

Like it or not alcohol stocks can make money but be careful because some really are duds

Credit: Lynda Giddens

The Myth of Sin Stocks

Why they are Actually a Very Safe Investment

Most people do not actually invest in sin stocks for fear of who will judge them or what they perceive as growing changes in the world cleaning up. More often than not they make good publicity or an interesting story on the news but are hardly the basis for investing in the average 401k. Besides investors having a problem with the vice or sin stock in question may believe that the long standing success of sin stocks are limited.

The reasoning is logical. Each day more and more evidence appears to come out linking risky behaviors like smoking or drinking alcohol with preventable illness or disease. More and more relationships and marriages are being ruined by gambling or viewing of adult content. One could only assume that tobacco company's, forced to pay hundreds of millions to cancer victims are likely to be out of business in the near future.

What these investors fail to realize though is that these vices and growing taboos in our society are not only beginning to gain traction elsewhere, but they are becoming the norm. As the quality standard of life increases across the globe, more and more people are choosing middle class lifestyles that include smoking, drinking and gambling. This is becoming most apparent in the growing economies of China, India and select portions of Africa. Regions like the Middle East and Europe may even completely ignore these "healthy" trends in North America.

What are the Best Sin Stocks to Invest in?

Maybe you are still not convinced...

Tobacco: Altria (MO) - This Virginia based conglomerate produces the world famous Marlboro cigarettes amongst a slew of other brand names. Interestingly they are well diversified with a variety of chewing tobacco such as Skoal. The company was formerly known as Philip Morris. Did you know they also own several lines of table wines? Although it makes most of its income through tobacco it is well poised to move in other directions in the future.

Alcohol: Diego (DEO) - This British manufacture of high end spirits features some of the most well known names with a diverse portfolio of brands. Hardly can a patron go to a bar or restaurant of any caliber and not find Smirnoff, Johnny Walker, Captain Morgan and Guinness amongst many other lesser known brands.

Gambling: Las Vegas Sands (LVS) - This Nevada based company gives you a great lens not only into the world of gambling stocks but a company that truly caters to luxury and pleasure with hotels and restaurants. This vacation behemoth is not tied down to Las Vegas as they have international locations (often monopolized) and various locations in other US states.

Everyone's Definition is Different

Someone's sin stock is anothers harmless pleasure

Credit: formatted_dad

Take Action - Do you Support or Protest Sin Stocks?

Make Your Own Investing Decisions and be Vocal

Maybe your not ready to invest in a tobacco company that you know produces the cigarettes you can't stand, but perhaps you would be interested in investing in the 7 Deadly Sins. Gluttony and sloth are available and are still profitable, with less burden on you the investor. Explore these themes and more.

Regardless of what you decide know and understand that this article is not about promoting sin or the actions of sin stocks. I have neither said that tobacco or alcohol products should be supported or are worthy of being promoted. This is purely an information introduction to the concept of sin stocks and what they mean to investors today. You make your own decisions and support what you feel is right or wrong.



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