Add Some Sin To Your Portfolio With This ETF

By Casey Murphy | August 22, 2014 AAA

Currently, there are thousands of exchange traded funds on the market, but despite their increasing popularity amongst retail investors, as of today there are no ETFs dedicated to one segment of finace: sinful investing. It's not uncommon for investors to look to their vices when looking to boost the returns in their portfolios. In general, these are the companies that conduct business in the area of alcohol and tobacco use and gambling. Companies that conduct business in these areas tend to be relatively recession-proof and often offer market-beating dividends. Since there are so many ETFs in the market there are still many venues available for adding some sin to your portfolio. (For more, see The Value of Sin Stocks)

Betting on Gaming

Have you ever wondered why places like Las Vegas and Macau tend to prosper despite the economic climate? Regardless of the economic situation there always seems to be sufficient demand for gambling establishments. Given the underlying traits of fear and greed, there is never a shortage of individuals looking to strike it rich. If the statement of “the house always wins” is true then why does it not make sense to bet your money on the house rather than at the tables?

For investors who want to increase exposure to the gaming sector, the most popular choice is the Market Vectors Gaming ETF (BJK). As you can see from the five-year weekly chart shown below, you’ll find that this group of companies has performed quite well over the past few years, and it doesn’t look like this trend is about to reverse any time soon. It wouldn’t be surprising to see long-term traders place their stop-loss orders below the support of the 200-day moving average ($37.48). (For more, see: Naughty Stocks For a Nice Portfolio.)

Boozy Beverages Always In Demand

When it comes to investing in sin stocks, alcohol is generally the area that most retail investors can most easily associate with. Again, disregarding social perspective and despite economic condition, there always seems to be ample demand for booze. From an investment perspective, this provides a built-in hedge and is one of the reasons to look at investing in companies within the sector. One of the most popular choices is Constellation Brands Inc. (STZ), which holds a portfolio of the well-known spirits, wine and beer brands. Based on the five-year weekly chart, the company is trading within a strong uptrend and there are no technical sell signals that suggest this should reverse any time soon. (For more, see: Socially Responsible Investing vs. Sin Stocks.)

Tobacco-Juiced Portfolios

Despite judicial decisions, healthy living campaigns and a decrease in supply, the tobacco industry continues to prosper. On the flipside, tobacco companies continue to pay market-beating dividends and trade at reasonable valuations. One of the biggest names in this sector is Philip Morris International Inc. (PM). As you can see from the ten-year weekly chart below, the stock is trading within an extremely strong long-term uptrend. The tightening towards the 200-week moving average suggests that current levels are an ideal entry level for long-term investors. It would not be surprising to see position traders protect their positions by placing a stop-loss order below the 200-week moving average ($74.72). (For more, check out: Sinful Stocks: The Natural Choice.)

The Bottom Line

Forget the naysayers, sinful investing is one of the most fundamentally sound investing practices. This group of stocks, in general, ignores recessions, pays above-average dividends and currently trade within strong long-term uptrends. Unfortunately, there are not many ETFs at this point that track this group of stocks. However, crafty investors have many options, such as the Market Vectors Gaming ETF, Constellation Brands and Philip Morris. (For more, see: Looking Into Sinful Investments.)

Related Analysis
  1. Stock Analysis

    Are High Yields Enough To Keep You In These 'Sin Stocks'?

  2. Stock Analysis

    Sin Stocks: The Natural Choice

  3. Stock Analysis

    Sizzling Sin Stocks

  4. Chart Advisor

    Traders Fight To Push Corn Prices Higher

  5. The iShares FTSE China 25 Index Fund etf has become popular with investors seeking China exposure. Here's why.
    Stock Analysis

    This ETF Offers Easy Access To China's Big Hitters

Trading Center