I came across a very interesting article on Yahoo Finance about the 10 best sin stocks to buy right now. Especially religious investors stay away from sin stocks on moral grounds because these companies are involved in the production and trade of sinful goods or services. For example, gambling, alcohol, tobacco, and weapons-related stocks are usually avoided by a portion of investors. Since there are less buyers for these stocks, there is a theory that says these stocks might be cheaper than the other stocks. You can also assume that since these companies produce “sin” goods and services, their customers are less price-sensitive and don’t mind spending a lot of money on these products. If you are addicted to smoking, you are going to buy a pack of cigarettes even if they are expensive and the company increases its price more frequently. That’s why investors believe sin stocks are more profitable.
Here is how Insider Monkey’s article on Yahoo Finance explains why investors should consider sin stocks:
“Sin stocks after all generally have a lot of positives on their side, including being recession-proof, generating strong and consistent earnings, and having limited competition. It’s not surprising then that UBS research found that the 50 largest sin stocks greatly outperformed the MSCI World Index (minus those 50 stocks) over the last 43 years, by about 5% annually, although there’s been a slide in performance over the past three years.”
So, Insider Monkey created a list of the 10 best sin stocks to buy now by using the following methodology:
“we’ll stick to companies in the alcohol, tobacco, gambling, and weapons development spaces, which are the four industries included on virtually every list of sin stocks. When it comes to weapons development, we only considered companies that actually produce weapons while excluding companies that supply parts to weapons manufacturers.”
Insider Monkey also used hedge fund sentiment scores to rank the best sin stocks. One of the companies in their list is Draftkings. Now, Draftkings is a gambling stock that is focused on sports gambling. According to the article, Draftkings shares gained 451% during the first 9 months of 2020. That’s insane. Investors think there will be a huge demand for sports gambling in the United States, so they can’t buy enough shares of this gambling stock.
Let’s take a look at another stock that was highlighted in the article: Altria Group (MO). If you hear this name for the first time in your life you wouldn’t know what this company does for a living. Well, it is a tobacco company that owns the famous Marlboro brand and several other tobacco brands and profits from people’s addiction to cigarettes.
If you are interested to read about the other sin stocks to buy now, please head to Yahoo and read 10 best sin stocks to buy now.