Sin pays. Associated Press reports that the Vice Fund which specialises in cigarettes, booze, gambling and military companies, including military hardware, is cleaning up the market. While the Standard & Poor's 500 index is down 1.9 percent this year, stocks of cigarette makers are up an average 12 percent and the stocks of booze companies are up 6 per cent. Forget about virtue. Investors are making money out of beer, butts and gaming.
Actually when you think about it, there's a very good reason why sin stocks do so well. It's all about human nature.
These sorts of companies have great cash flow in tight economies. There are high barriers to entry which means they don't get lots of competition. Also, they don't spend much on research and development,they control most of their own distribution, they have lean cost structures, and consumers buy the stuff in good times and bad. Virtue doesn't pay.
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