How to Invest in Sin Stocks
There have always been ways to invest in sin stocks, but the notion of making a category out of companies that sell products like cigarettes, beer, guns, and weed came about in part from the rise of socially responsible investing. While socially responsible investors largely avoid sin stocks, the strong returns that the businesses in these categories have given their shareholders have made them attractive to many investors.
To invest in sin stocks, you have to answer a few basic questions:
Just because you like the idea of investing in sin stocks doesn't mean that you necessarily like the prospects for all of them. As an example, the tobacco industry has been in a longtime secular decline for decades, with the number of smokers in the U.S. falling dramatically. Companies have been able to ratchet up prices during that period in order to sustain revenue and profits, but some fear that there's a limit to how high prices can go before they reach a maximum. Similarly, gun stocks did well under political conditions that created a high likelihood of gun control regulation. Yet with a friendlier political environment, firearms manufacturers have suffered from lower demand for their products.
Source: Fool.com
