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WHY I LIKE “SIN” STOCKS

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F. A. Piocos

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"I'll tell you why I like the cigarette business. It costs a penny to make. Sell it for a dollar. It's addictive. And there's a fantastic brand loyalty." Warren Buffett

"No matter what the market's doing, no matter who wins the election, people continue to drink, people continue to gamble, continue to smoke.” Dan Ahrens, Vice Fund (VICEX)

When you talk about the cigarette business you inevitably talk about Altria (MO). Altria, formerly known as Philip Morris. It has a PE around 12 and a dividend yield around 5%. It is one of the best buy and hold stocks of the past two decades. If you had invested $10,000 in MO in 1986 it would be worth more than around $300,000 today. And you would be collecting over $15,000 in dividends annually.

Anheuser-Busch (BUD) “the king of beers” might also be the king of beer stocks. It has a PE around 19 and a dividend yield over 2%. There is also Diageo (DEO) which investors may want to consider for their portfolio.

On the domestic gambling front consider Wynn Resorts (WYNN), Harrah’s (HET), Las Vegas Sands (LVS), and MGM Mirage (MGM). For a more speculative foreign investment consider Melco PBL Entertainment (MPEL). It is a play on the growth of the gaming industry in Macau. I don’t believe most investors fathom the magnitude of the growth of Macau and the gaming industry. It has been estimated that the Macau gaming industry will become seven to eight times the size of Las Vegas. This will also lead, I believe, to a real estate boom in Macau creating other investment opportunities.

For simplicity and some diversification there’s even a “vice fund,” appropriately called the Vice Fund (VICEX), which hold some “sin” stocks.

There is also potential to profit from fast food and caffeine. Such as, Yum! Brands (YUM) and Starbucks (SBUX). Although these are large cap companies they will continue to increase earnings through international growth, specifically China.

“Sin” stocks offer value and growth even in bear markets. So consider “sin” stocks when looking to add a quality stock to your portfolio. It might be worth the gamble.

About the author:

F. A. Piocos
GuruFocus - Stock Picks and Market Insight of Gurus

Rating: 4.2/5 (5 votes)

Comments

armeetofo
Armeetofo - 7 years ago
good idea
vooch
Vooch - 7 years ago
I like to call them "Killer Stocks", but I add military stocks into the mix.

Beer, Tabacco, Casinos, Military/Defense = Winners

- Vooch

P.S. Of course, "Thou shalt not kill" is also a sin ... hehehe

armeetofo
Armeetofo - 7 years ago
true, some people like that

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