Sin Stock

AAA

DEFINITION of 'Sin Stock'

A stock of a company either directly involved in or associated with activities widely considered to be unethical or immoral. Sin stocks are found in sectors whose activities are frowned upon by some or most of society, because they are perceived as making money from exploiting human weaknesses and frailties. Sin stock sectors therefore include alcohol, tobacco, gambling, sex-related industries, weapons manufacturers and the military. Also known as “sinful stocks", they are the polar opposite of ethical investing and socially responsible investing, whose proponents emphasize investments that benefit society.

INVESTOPEDIA EXPLAINS 'Sin Stock'

Investing in sin stocks may be anathema to some investors, but the fact is that many of them are sound investments. The very nature of their business ensures that they have a steady stream of consumers. As well, since demand for their products or services is relatively inelastic, their business is fairly recession-proof. The lesser degree of competition also ensures fat margins and solid profits for sin stocks.

Research suggests that sin stocks are also likely to be undervalued because their negative image leads to them being shunned by analysts and institutional investors. This makes them attractive investments for investors willing to take the plunge, since a number of the biggest sin stocks have great long-term records of generating shareholder value. From 2008 to 2012, the U.S. tobacco, distilleries and brewers sub-sectors generated double-digit annual returns, easily outperforming the broad market.

Some of the best-known sin stocks include Altria Group, Anheuser-Busch InBev, Diageo, General Dynamics, Smith & Wesson, Caesar’s Entertainment, Las Vegas Sands and Philip Morris.

 

RELATED TERMS
  1. Shareholder

    Any person, company or other institution that owns at least one ...
  2. Social Responsibility

    The idea that companies should embrace its social responsibilities ...
  3. Socially Responsible Investment ...

    An investment that is considered socially responsible because ...
  4. Sector Fund

    A stock mutual, exchange-traded or closed-end fund that invests ...
  5. Domini 400 Social Index

    A market cap weighted stock index of 400 publicly traded companies ...
  6. Pigovian Tax

    A special tax that is often levied on companies that pollute ...
RELATED FAQS
  1. Are investments in the drug sector appropriate for ethical investors?

    A number of aspects are factored for ethical investors considering the drug sector, such as animal testing or the type of ... Read Full Answer >>
  2. How do you conduct effective social responsibility training?

    One way to provide employees with effective social responsibility training is to base training sessions on resources offered ... Read Full Answer >>
  3. What are the risks of using CI (competitive intelligence) for espionage?

    The line between competitive intelligence, or CI, and illegal corporate espionage is not always clear. This is especially ... Read Full Answer >>
  4. How can a socially responsible investor gain exposure to the metals and mining sector?

    Socially responsible investors can pursue a couple of traditional avenues to invest in metals and mining. The first method ... Read Full Answer >>
  5. How have business ethics evolved over time?

    Business ethics refers to how ethical principles guide a business's operations. Common issues that fall under the umbrella ... Read Full Answer >>
  6. What is the forest products sector?

    The forest products sector is comprised of companies involved in growing, harvesting and/or processing wood and wood fiber, ... Read Full Answer >>
Related Articles
  1. Investing Basics

    Stock Basics Tutorial

    If you're new to the stock market and want the basics, this is the tutorial for you!
  2. Mutual Funds & ETFs

    Investing In Leisure Funds

    If you thought investing and fun don't go together, think again. Find out more here.
  3. Personal Finance

    Go Green With Socially Responsible Investing

    Find out how morals and ethics can bring you a surprising return.
  4. Investing Basics

    Sinful Investing: Is It For You?

    Sin stocks may seen outright undesirable to some, but these "naughty" industries bring stable returns - even in hard times.
  5. Mutual Funds & ETFs

    Socially Responsible Mutual Funds

    It is possible to avoid unethical investments and still profit from mutual funds. Find out how!
  6. Mutual Funds & ETFs

    Socially Responsible Stocks: Do Good Deeds Punish Profits?

    Socially responsible investing doesn't mean accepting lower returns. Find out why squeaky-clean stocks shine as investments.
  7. Investing

    The Evolution Of Sinful Investing

    Like beauty, whether something is sinful often depends whom you ask.
  8. Mutual Funds & ETFs

    Survival Tips For A Stormy Market

    Learn which stocks to watch and which to avoid when the Dow starts to sink.
  9. Options & Futures

    Socially Responsible Investing Vs. Sin Stocks

    Can your principles make you richer or poorer? Find out if it pays pick your portfolio based on ethics.
  10. Options & Futures

    Offset Risk Without Investing Abroad

    With a little know-how, you can keep risk from topling your portfolio of domestic equities.

You May Also Like

Hot Definitions
  1. Expected Return

    The amount one would anticipate receiving on an investment that has various known or expected rates of return. For example, ...
  2. Carrying Value

    An accounting measure of value, where the value of an asset or a company is based on the figures in the company's balance ...
  3. Capital Account

    A national account that shows the net change in asset ownership for a nation. The capital account is the net result of public ...
  4. Brand Equity

    The value premium that a company realizes from a product with a recognizable name as compared to its generic equivalent. ...
  5. Adverse Selection

    1. The tendency of those in dangerous jobs or high risk lifestyles to get life insurance. 2. A situation where sellers have ...
Trading Center