How to Profit From So-Called ‘Sin Stocks’

There is an entire ecosystem of “sin stocks” that profit from questionable activities. I don’t mean shady or illegal… just those that might not be welcome at a church picnic.

Without getting religious (or wading into a philosophical discussion), let’s just say that these industries aren’t the most family-friendly. Yet they have a knack for attracting steady streams of cash… in both good times and bad.

W.C. Fields once famously quipped, “I spent half of my money on gambling, alcohol, and women. The other half I wasted.” The actor and comedian died in 1946. That attitude is just as relatable for many today as it was then, which explains why casinos and liquor stores have no trouble attracting clientele.

Consumers spend freely on their vices of choice — even when the economy is in a downturn. In fact, tougher conditions often encourage even more spending, making demand for these products and services somewhat countercyclical.

Keep in mind that favored brands within these sectors also carry robust pricing power, which protects margins during inflationary periods such as we’re seeing today.

These same groups also happen to be closely regulated. In many jurisdictions, there are no new permits or operating licenses being issued. That government-sanctioned barrier to entry provides a protective moat around the existing leaders.

Whatever the reason, so-called sin stocks often show a pronounced edge over the broader market. In fact, one study by a pair of finance professors at Cambridge University and London Business School found that alcohol and tobacco stocks have consistently outrun the market for the past 120 years.

As you might expect, asset managers have constructed specialized funds to capitalize on this phenomenon. The AdvisorShares Vice ETF (NYSE: VICE) tracks a customized index that “invests in the products and services that people find pleasure in regardless of economic conditions.” The exchange-traded fund (ETF), which delves into offshoots like e-sports, has attracted about $7 million in assets, although performance has been mixed thus far.

Aside from tobacco, here is a brief rundown on five other classes of sin stocks.


Once restricted to the Nevada desert and the Boardwalk of Atlantic City, casino gaming has become widely accepted across most of the country.

All but a handful of states have legalized casinos or racetracks, to say nothing of lotteries, sports wagering, and other games of chance.

These operations contribute nearly $10 billion to state and local taxes annually and support a wide range of public works (such as education).

And betting with the house usually pays off.

None of this is news to HYI readers. We cashed out a nice profit on Las Vegas Sands (NYSE: LVS) a few years ago.

And I still maintain a position in VICI Properties (NYSE: VICI), which owns 54 gaming facilities, including gems like Caesar’s Palace and the Venetian Las Vegas. The company pockets $3 billion in annualized cash rents from a dozen tenants and returns a good chunk of it to investors via dividends.


We’ve come a long way from the dark days of Prohibition. Whether it’s a hazy IPA, a neat bourbon, or a glass of wine, approximately two-thirds of Americans like to unwind responsibly with the occasional alcoholic beverage.

As a country, we downed 192 million barrels of beer last year, generating $135 billion in sales. We consume about five gallons of wine and spirits per capita.

Many antiquated laws and regulations have been relaxed in recent years, making life easier for manufacturers, wholesalers, and retailers within our three-tier distribution framework.

Investment opportunities abound in this sector, from brewers scuh as Boston Beer (NYSE: SAM) to liquor purveyors like Constellation Brands (NYSE: STZ). The latter, which owns Casa Noble tequila and the Robert Mondavi Winery, has raised its dividend by more than 30% since 2022.

I’ve got my eye on Diageo (NYSE: DEO), whose vast portfolio of 200 different potent potables ranges from Guinness Stout to Smirnoff Vodka to Captain Morgan rum.

Adult Entertainment

Let’s face it, sex sells. Always has, always will.

There are several publicly traded fish in these murky waters. One of the largest and most successful is RCI Hospitality (NSDQ: RICK), which owns and operates dozens of cabarets, gentlemen’s clubs (you might call them “strip clubs”), and other such venues. The company also manages conventions, trade publications, and various internet retail sites that sell adult-themed products.

While well off its highs in the mid-$90s, the stock has posted a scintillating gain of 170% over the past five years, along with a modest quarterly dividend that has doubled from $0.03 to $0.06 per share.


While gun control has become a very divisive issue, there’s no debating the demand among the millions of ardent supporters who exercise their Second Amendment rights to the fullest.

According to the National Shooting Sports Foundation, there are 22 million new registered first-time gun owners just since 2020. That’s more than the population of Michigan and Georgia combined.

Founded before the Civil War, Smith & Wesson (NSDQ: SWBI) has been manufacturing a full line of firearms and shooting accessories for generations. The company has a full product arsenal of handguns and rifles, including the iconic .44 Magnum. While these models are commonly marketed to hunters and gun enthusiasts, they are also widely used by law enforcement officers.

The company generated $137 million in sales last quarter with a healthy gross profit margin approaching 30%. The stock has gained about 40% over the past year, nearly doubling the return of the S&P 500. It also carries a respectable yield of 3.0%, which is about 50% above the market norm.

In the eyes of some, military weaponry and hardware is also verboten — even when used by the good guys in defense of peace and freedom around the world. The whole environmental, social, and governance (ESG) movement isn’t exactly aligned with tanks, nuclear attack subs, and guided missile systems.

But many institutional investors have softened their stance on this issue, particularly after Russia’s invasion of Ukraine. And there’s no denying that geopolitical conflict is great for business.

Even the Yale University endowment fund holds a sizeable stake in defense contractors such as Lockheed Martin (NYSE: LMT), which supplies the Department of Defense with everything from fighter jets to advanced electromagnetic and hypersonic weapons. The company posted a profit of $1.5 billion ($6.39 per share) last quarter and returned every penny to stockholders via dividends and share repurchases.

One of my favorites in this group is AeroVironment (NSDQ: AVAV), a top manufacturer of drones used for surveillance — and the ability to take out targets with pinpoint accuracy.


Another polarizing issue, the plant referred to as the “devil’s lettuce” by some is viewed as a medical godsend by others. Opposition to the drug has evaporated over the past decade, and more than 80% of Americans now support decriminalization.

Washington was the first state to pass legislation legalizing recreational use, and 23 others have followed — making marijuana legal in roughly half of the country. Most of the rest allow for medicinal usage. And there are additional ballot initiatives underway this fall from Florida to Idaho.

Infographic: Half of Americans Live in States Where Weed Is Legal | Statista You will find more infographics at Statista

The number of dispensaries has exploded to 15,000 — and counting.

Meanwhile, the U.S. Drug Enforcement Agency (DEA) has just decided to move marijuana from Schedule I of the Controlled Substances Act (drugs with high potential for abuse and no medicinal value) to the much less restrictive Schedule III. This reclassification could ease many restrictions and be a boon for growers and distributors.

As it stands, the industry racked up $36 billion in sales last year, and spending is forecast to rise at a 10% pace over the next five years.

Those with an interest in this space have plenty of options. Income investors may consider REITs such as Innovative Industrial Properties (NYSE: IIPR), which owns a growing portfolio of more than 100 cultivation facilities and retail stores.

The stock’s quarterly dividend has more than doubled over the past five years to the current $1.90 per share ($7.60 annually), which provides a hefty yield above 7%

Is There Vice in Your Portfolio?

This list is by no means all-inclusive. To be sure, many investors also go to great lengths to keep fossil fuels out of their portfolio, particularly coal producers such as Peabody Energy (NYSE: BTU). Of course, that’s not easy, considering a great variety of these sin stocks can be found in your average S&P 500 index fund.

Virtue is great, but I would say that it might not always be compatible with your portfolio. We all have our weaknesses — whether it’s a stiff drink, a cigar, a few hands of poker, or just a Krispy Kreme doughnut.

Editor’s Note: The last time there was a presidential election in the U.S., shares of cannabis companies soared 569%… 1,020%… even 2,426% and higher.

But that wasn’t a one-time event.

In fact, every four years, the cannabis market experiences a massive profit wave… no matter who’s running.

This year, you, too, can profit from the practically inevitable cannabis run-up. And but you need to know which cannabis stocks make the best potential winners.

That’s where my colleague John Persinos comes in. He’s the chief investment strategist of premium trading service Marijuana Profit Alert.

By applying his proprietary screening methodologies, John pinpoints for subscribers the most attractive plays on the “green rush.”

John’s publication provides specific, actionable advice on the best investments in the psychotropic revolution. In his portfolio of holdings, he strive to strike the right balance between risk and reward. To learn more, click here.