I’m currently looking into sin/vice stocks—i.e., gambling, alcohol, tobacco—and I’d like to know what’s looking good heading into the next decade.
A. Scott Thompson, Via the Internet
While they’re not every investor’s cup of tea, so-called sin stocks are a part of the market that it would be wise to consider when the economy is expected to slow down. The reality is that even through hard times, people continue to pay for their cigarettes, drink cocktails, and bet on the tables—perhaps even more so.
There’s not enough space here to sort through a range of these stocks, but one of the factors you’ll want to look at is a company’s international presence. Emerging markets present tremendous growth opportunities for many of these companies. Also, know that generally these businesses benefit from high profit margins, e.g., the cost of manufacturing cigarettes is far less than the $8 plus per pack that’s currently charged in New York City.
Mutual fund investors may be interested to know that there’s a Vice fund (VICEX) that concentrates on these stocks. It carries a five-star rating from Morningstar and, as of early February, is ranked in the top 1% of its category with a five-year annualized return of 21.8%.