Take a look at the chart below. It shows the International Securities Exchange (ISE) SINdex (blue line), which includes manufacturers of cigarettes and other tobacco products, producers of alcohol and owners of casinos and gaming facilities.
So far this year, the SINdex has climbed by more than 17%. The broader S&P 500 index (brown line) on the other hand, is down by 2% for the same period.
Currently trading at the 87 range, SIN has rebounded by more than 78% off its March lows of 48.8, compared to only 35% for the wider market.
Sin sells well during tough times - just look at how it’s outdoing the broader markets...
You would think that businesses selling non-essential items wouldnt not be enjoying a good run... but it seems that people are reluctant to give up their ‘vices’. And sin stocks often do well during a recession.
Sin stocks’ outperformance of the broader market is explained to a large extent by the ways of the human psyche. Behavioural psychologists say that people often look to escape their worries during hard times by indulging in vices.
Vice investing isn’t a sure bet. As with any company, you still need good management and a solid business strategy to survive. So bear in mind that you should pick these stocks carefully. But so long as you’re not worried about the moral element, there could be some profits to be made here.
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