(LVS) Sin Stocks: Two Profitable Vice Investments Soaring Despite the Recession

June 5th, 2009

by David Fessler, Advisory Panelist, Investment U

Most of us aren’t compulsive gamblers, heavy drinkers, or chain smokers. Three habits that over time, are bad for your wallet and – more importantly – your health.

But from an investment standpoint, the so-called “sin stocks” – companies that make alcohol, firearms, cigarettes and those that operate gambling casinos – are doing quite well.

How well?

The International Securities Exchange SINdex (SIN), an index that solely tracks “sin” stocks, is up more than 30% since January…

This compares to the S&P Retail Index’s gain of just 15%. Against the broader S&P 500 Index, it’s done even better: up nearly 40% in just the past two months. And it’s up nearly 88% since its March low.

Perhaps your personal philosophy isn’t inclined toward vice or sin stocks. And that’s fine – there are plenty of other sectors that are performing well these days.

But for those who want further diversification in a sector that’s highly recession-resistant, you might want to consider investing in a vice or two (as opposed to engaging in them).

Sin Stocks: Rolling the Dice on One of the Biggest Casino Operators in the World

Take casino stocks like Las Vegas Sands (NYSE: LVS), one of the world’s largest developers of integrated, multi-use resorts.

The company operates the Venetian, the Sands Macao, the Palazzo Resort-Hotel-Casinos, the Sands Expo and Convention Center, and the Venetian Macao in the People’s Republic of China Special Administrative Region of Macao.
Additional properties under development include the Cotai Strip, a master-planned development of resort casino properties in Macao, the Marina Bay Sands in Singapore, the Sands Bethworks, Pennsylvania’s first gaming resort destination in Bethlehem, PA and the a leisure resort complex on Hengqin Island in the People’s Republic of China.

As of this writing, shares of the Sands have soared 488% from its March low. Even after that impressive run-up, the Sands shares still trade nearly 92% BELOW their $138.93 high of October 2007.

Nine out of the 11 brokerage firms that follow the Sands shares don’t like the company’s prospects, and rate it at a “Hold” or worse. But brokers tend to take short-term views, particularly when things are at their worst.

With Las Vegas Sands, the news is fairly bleak. The company announced a wider than expected quarterly loss earlier this month, as the economic downturn kept travelers and gamblers sidelined at home.

But bad news and any resulting pullback in the shares make great points to establish a position in this former high-flyer.

Chairman and CEO Sheldon Adelson thinks so too, and he had this to say on the earnings conference call:

“We have witnessed recent positive trends in gaming volumes and an improving environment for future group business bookings – especially into later 2009 and early 2010 – which, together with the full implementation of our cost-savings program, should benefit our Las Vegas performance going forward.”

Sin Stock Investing: Soaring Spirits & Liquid Gains

Another robust company to consider when investing in sin stocks is Central European Distribution Corp. (Nasdaq: CEDC), one of the leading integrated spirits beverage businesses operating primarily in Europe.

The company produces over nine million cases of vodka annually in Poland for export. And it imports spirits, beer and wine into Russia, Hungary and Poland. The company sports an impressive lineup, with over 700 brands distributed in Poland and elsewhere.
Since 1999, the company has been on an acquisition spree, snapping up over 23 companies and their brands, primarily financed through shares of stock in the parent company.

It seems to be working: Shares are up a blistering 321% since its March lows, in spite of poorer than expected quarterly results (primarily the consequence of expenses associated with two acquisitions in March and May).

As economic conditions improve, shares should continue to reflect the accretive effects of the acquisitions.

An Entire Portfolio of “Sin Stocks “

These are just two of many excellent buys in the sin stocks sector. Investment U Chairman Alexander Green has spent much of his time researching vice investing recently because of the opportunities these stocks offer.

His research showed that vice stocks have historically been huge market out-performers during recessionary times.

Yet – and this is what really had his alarm bells ringing – they had badly underperformed during the recent downturn.

And so – to our Oxford Club subscribers – he unveiled the Seven Deadly Sins Portfolio to capitalize on an expected rebound in this sector.

And that’s exactly what’s happened.

Barely more than two months old, the Seven Deadly Sins Portfolio is already up over 60%. (For comparison purposes, that’s equivalent to the average money market compounding at current rates for the next 100 years.)

Good investing,

David Fessler

View original at: Investment Advice and Investment Research with a Contrarian Point of View

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