Getty Images
Ethical or sustainable investing is all the rage right now. It sounds great, but the problem is that there’s no accepted industry definition of what constitutes an ethical investment. Ethics, by definition, are personal.
Some investors might want to avoid investing in companies that create high levels of carbon emissions. Others may have a problem with alcohol and tobacco. Some investors need to tailor their portfolio very carefully to match their religious beliefs.
Other investors really don’t care about any of that. They just want to make money.
Rightly or wrongly, sin stocks are popular. Many Americans like to drink, smoke and gamble. As an investor, having some exposure to these industries can be an interesting way to generate extra returns for your portfolio.
After all, that’s why we invest. To make money. The more restrictions you place on a portfolio, the smaller the number of investments you can choose from. This means you’ll have less diversification, which could lead to more risk and potentially lower returns.
Like any idea, what really matters is how you put it into action. There’s no point in just throwing a dart at a list of stocks and hoping for the best. You need a strategy, and one that can constantly adapt to the changing landscape.
There’s a limit to how much data we can take in ourselves, which is why we take advantage of AI to do it for you. We’ll explain more about how we do that, but first let’s take a closer look at which industries and companies are considered sin stocks, and how they can potentially generate sizable returns for investors.
Cannabis
One of the more recent additions to the investment landscape are cannabis stocks. The first cannabis company to be listed on a U.S. stock exchange was the Canadian business Cronos Group, which only listed four years ago.
Cannabis stocks have gone through a massive surge in popularity, with a number of other companies following Cronos’ lead. In addition to Cronos, our AI also considers other large cannabis companies including Canopy Group and Tilray.
Tilray in particular has been on a run lately. It’s been a tough few years for the company, but over the last month the stock has rebounded, gaining an impressive 19.75%.
Tilray is currently a position we hold in the Guilty Pleasures Kit, as well as Organigram, Greenlane Holdings and cannabis property company Innovative Industrial Properties.
The cannabis industry is still in its infancy, and many of the companies making waves in the sector aren’t yet making profits. As cannabis becomes more widely accepted and legalized both in the U.S. and around the globe, there is a huge market to be unlocked and also potential profits for investors.
Download Q.ai today for access to AI-powered investment strategies. When you deposit $100, we’ll add an additional $50 to your account.
Tobacco
Tobacco as a business has been around for a very long time. The oldest tobacco company in the U.S. was the Lorillard Tobacco Company, which started in 1760 and lasted all the way until it was acquired by British American Tobacco in 2015.
It may not be the healthiest habit going around, but there’s no denying that the tobacco industry is super profitable.
In 2018, the profits from the big six tobacco manufacturers was $55 billion. That’s more than the combined profits of Coca-Cola, Mondelez, Fedex, General Mills
Not only that, but the industry’s profit margins are massive, reaching as high as 71% in some markets around the world.
These days the companies are also constantly looking for ways to diversify their income, as the health consequences of smoking become more widely understood and government regulation puts pressure on their business model.
E-cigarettes and vaping are one of the key areas for growth, as well as the cannabis business and, somewhat surprisingly, the pharmaceutical industry.
The companies our AI looks to potentially invest in each week include Philip Morris International
Love & Dating
Love sells. It’s that simple. As humans, we crave connection with other people and there are companies out there who have built billion dollar businesses off the back of those desires.
It’s also a surprisingly consolidated industry. Despite the ever growing number of dating and relationship apps available, most of them are owned by just a few main companies.
Match Group
There are also companies that cater towards adult entertainment. Companies like Playboy and gentlemens club operator RCI Hospitality are stocks that our AI considers for the allocation to this sector of the Kit.
Right now our AI is staying away from dating companies, which appears to be a good call based on the recent earnings announcement from Match Group. They released their second quarter figures on Tuesday and their stock price fell 22% on the back of the less than inspiring figures.
Revenue for Match Group had grown over the period, but at a lower rate than expected. The bigger concern was their forward guidance, which suggested no growth at all for the third quarter of 2022.
As with any sector, circumstances can change, and what doesn’t seem like an attractive investment now can become one in the future. It’s why we automatically rebalance our Investment Kits every week.
Alcohol
The United States alcohol industry generated revenue of $250 million in 2021, with this figure expected to grow by 10.51% a year over the next three. The average American spends around $750 on alcohol each year and knocks back 24 gallons of the stuff.
That’s big business, and that’s before taking into account alcohol that’s exported by U.S. companies to overseas markets.
For investors, there are some big global players in the U.S. market to consider.
In the alcohol vertical our AI considers companies that include Anheuser Busch InBev, which manufactures famous beer brands Budweiser, Corona and Rolling Rock. Brown Forma, who makes Jack Daniel’s and Finlandia Vodka is another on the list, as well as Diageo, which is home to Johnnie Walker, Smirnoff, Captain Morgan, Tanqueray and Guinness.
As of right now, our AI is steering clear of alcohol stocks, but these positions can change on a weekly basis if there’s new information.
Gambling
For anyone who’s ever visited Las Vegas, the idea that the gambling industry is a lucrative one comes as no surprise. The gambling and sports betting sector is a cash cow, and there are plenty of major companies generating huge revenue in the space.
One of our AI’s largest current positions in the Guilty Pleasures Kit is Caesars Entertainment
Despite a disappointing second quarter earnings call, Caesars stock has been enjoying a bounce in recent weeks and is up 16.56% over the past month.
Other casino companies in this space that our AI considers include MGM Resorts, Las Vegas Sands, Melco Resorts & Entertainmen
Sports betting and online gambling has been a huge growth area for the industry in recent years, with many companies focusing purely on a digital gaming strategy. Fantasy sports and betting website Draftkings and online casino company Rush Street Interactive are examples of upstarts in the industry, having both been founded in 2012.
Lastly, horse racing is another area that our AI considers, with companies such as Churchill Downs and Penn National Gaming
How to invest in ‘Sin Stocks’
As you can see there is big money to be made in these industries, and for investors it can be an area to consider for further portfolio diversification. Not only that, but the majority of these industries have very long track records, and with human instincts unlikely to change, they’ll probably be around for a long time to come.
If you want to invest yourself you can pick individual stocks, but that tends to be a risky game. There’s no way to know whether the company you’re choosing is the right one, or even if the industry you’re investing in is going to perform well.
We use AI to analyze millions of data points and then regularly rebalance the Guilty Pleasures Kit across the different verticals and the companies within that vertical. Sometimes alcohol stocks might be a good place to be, other times cannabis stocks might be looking better.
As with any investment, the environment can change quickly. Having AI on your side means your investments are always adjusting based on the most up to date information.
Download Q.ai today for access to AI-powered investment strategies. When you deposit $100, we’ll add an additional $50 to your account.
Source: https://www.forbes.com/sites/qai/2022/08/04/how-investors-can-profit-from-sin-stocks-like-tilray-cannabis-and-matchcom/