Hello, Community,
Today I’d like to introduce you to a category of stocks that’s likely to divide opinion. I’m talking about so-called “sin stocks.”
While many focus on ESG, sustainability, and the like, there are also investors who are looking for the exact opposite. I’m one of them.
Some people traditionally associate sin stocks with the alcohol, tobacco, and gambling sectors. I’d like to make it a bit more interesting and expand the scope of “sin.”
To do this, I’m drawing on the seven deadly sins and would like to introduce a few stocks that (may) be associated with them: pride, greed, lust, envy, gluttony, wrath, and sloth.
First things first: I’d like to avoid moral debates as much as possible. If this is already making you gasp for air, please skip this post.
Sin 1: Pride.
Those who are to perish first become proud; and pride comes before a fall
This includes companies operating in the luxury segment. For example $RMS (+0.55%) , $RACE (-1.08%) or this one, which is very popular $MC (-0.5%). What makes them interesting, in my view, is that the more luxurious they are, the less dependent they are on economic cycles. The super-rich hardly care when an economic crisis strikes. On top of that, they can achieve exorbitant margins, since pricing simply has to reflect the nature of luxury.
Sin 2: Greed
For greed is the root of all evil
The financial sector and its stocks can be counted among the “greed” stocks. For example, $JPM (+0.57%) or $DBK (+1.38%) , but also commodity companies such as $XOM
To be honest, I’m less familiar with this sector than with others—the financial industry is generally less interesting due to its lack of transparency.
I find commodity companies more interesting—perhaps even “suppliers” such as $NE (+2.93%) , which are manufacturers of oil rigs.
Sin 3: Lust
I don’t have any stocks in this sector in my portfolio myself. For quite some time, I’ve been $RICK (+1.83%) —they operate in the “adult entertainment” industry and run strip clubs. They also run restaurants (“Bombshells”) where the waitresses’ uniforms consist of very little fabric. In my view, however, these Bombshells aren’t that attractive, which is why I didn’t invest.
You could certainly also include apps like $GRND (-1.43%) in this category as well.
Do you have or know of any stocks you’d classify here?
Sin 4: Envy
This category includes cosmetics stocks such as $OR (+0.65%) or social media stocks like $META (+6.81%) . My portfolio is also underrepresented here.
Sin 5: Gluttony
Binge drinking and gluttony characterize people who have lost their way
The classic among sin stocks. This category includes alcohol companies such as $DGE (+2.08%) , tobacco companies such as $PM (-0.45%) or fast-food companies like $MCD (-0.45%)
An even more extreme example would probably be $TSN (+0.32%) a meat producer.
Since tobacco and alcohol (can) be addictive, there’s a strong lock-in effect. That’s likely why many investors steer clear of such stocks.
I consider $MNST (+1.32%) one of the most exciting “gluttony” stocks. As a manufacturer of energy drinks, they remind me a bit of tobacco companies, though they’re hardly regulated and can advertise freely. Strong growth in the market—and in the stock.
Sin 6: Wrath
The second classic. Wrath encompasses all stocks in the defense industry. Still frowned upon from an ESG perspective just a few years ago, they’re now almost back in vogue. $LMT (+1.17%) , $RTX (-0.18%) or $RHM (-1.8%) should be familiar to most people. They are heavily dependent on government contracts and thus on political decisions. However, the trend over the next few years should be upward.
In my view, an exciting “Wrath” stock is $AXON (-2.13%) . It’s a supplier to law enforcement, primarily in the U.S.—for example, through body cameras and Tasers. It was at $90 just before a buying opportunity—and I unfortunately missed it.
Sin 7: Sloth
Don’t be sluggish when you need to be diligent
One could include companies here that contribute to inactivity or passivity. First and foremost, the gambling industry. I see the most exciting stock here in $EVO (+1.07%). It’s one of the stocks with the highest weighting in my portfolio. It’s a “supplier” for online casinos. Growth is enormous—the gambling industry is still very much analog. But the online segment is growing at double-digit rates annually—just like Evolution Gaming. Plus, it pays a nice dividend.
Otherwise, you can also look at various brick-and-mortar casino operators.
That was my tour of the “sin stocks.”
Now I’d be interested to know which exciting sin stocks you have.
And also, whether you see any other “sin” sectors.
By the way, I’ve had the prison operator $GEO (+1.25%) in mind the whole time—it seems to me to be the final stop for many sins.
