7 Investment Ideas For The Sinful Investor

Karl Wiebe

Posted on Thu 1st Nov, 2007 06:53:47 PM

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Do you consider yourself a sinful investor? “Sin” stocks are companies that do business in the tobacco, gambling, alcohol, weapons and entertainment business. Some people are ethically opposed to such stocks, arguing that owning them is the equivalent to supporting these businesses. Others don’t mind, or even partake in the industries themselves, and figure that if these companies are making money, then as an investor they should reap the rewards.

For those that are feeling a bit sinful, here are 7 “sin” stocks that deal with ways to profit from bad habits. Make sure to do your own research and learn more about a slice of the market that caters to our more decadent desires.

1. Anheuser-Busch Companies, Inc. (NYSE: BUD): This company has a strong brand name and a steadily-increasing dividend. It’s up about 5 per cent year-to-date and pays a dividend of about 2.5% per year. Over the past five years, it’s been flat. Their growth seems to be slowing down as competition increases. Bud may be the King of Beers, but it’s high debt and low growth would indicate that it’s a steady producer of unspectacular but solid earnings.
2. Vice Fund: Consider a mutual fund of a whole bunch of sin stocks (found at www.vicefund.com). It’s performed at 20% per year over the past 5 years. This fund invests in casinos, weapons, gaming equipment and slot machines.
3. Molson Coors Brewing Company (NYSE:TAP): If Anheuser-Busch looked a little flat and unexciting, check out Molson Coors, another beer producer who’s seen some success over the past few years. They are steadily increasing their equity and their stock is up 60% over the past 5 years. It’s also increased their dividend steadily over that time frame.
4. Altria Group, Inc. (NYSE:MO): Altria is one of the greatest companies of all time from an investor’s point of view—they have a healthy and increasing dividend, they have customers who are literally addicted to their product and they are geographically diversified. And they pump out cash, and lots of it. You might better recognize the company as “Philip Morris”, the gigantic cigarette manufacturer. They recently spun off Kraft Foods and are looking to similarly spin out Philip Morris International, with the belief that smaller, autonomous companies can run leaner and meaner and make more money for shareholders.
5. Great Canadian Gaming Corporation (TSX:GC): At a market cap of just over one billion dollars, this little company might not hit the radar screen of many large investors. However, they operate 11 casinos, mulitple horse racetracks and a hotel among other diversified businesses spread out over three Canadian provinces and Washington State. It’s up 21% in the past 12 months and over 300% in the last 5 years, although it’s struggling with profitability as it continues to acquire and grow.
6. Rothmans Inc. (TSX:ROC): This Canadian cigarette company enjoys many of the staples of a good investment—a steadily increasing dividend, a high (30%) profit margin and a repeat business model (since their customers are addicted). It’s dividend payment is almost 6 per cent per year, so income investors would want to research this one further.
7. Starbucks Corporation (NASDAQ:SBUX): Is coffee addictive? Some would argue that charging five dollars for a high-end beverage is definitely a sin, but that hasn’t kept customers out of the stores. Expansion has been going full-tilt for the past 5 years, but the stock has come off sharply from it’s head-spinning highs of 2006. It’s still trading at around 30 times earnings, but many investors have taken their profits and left the scene. With plans to expand internationally and market high-end teas and coffees in China and India, the huge growth that we’ve seen from this chain could continue for the next decade.