It's a Dirty Business, but Somebody's Got to Do It

For some reason not everyone likes to invest in booze, gambling, and strip clubs. But there's a mint to be made if you play the so-called sin stocks right. And there's nothing quite like having a few friends over to "research" new drinks while playing a game of cards.

The great thing about many of these companies is their relatively steady diet of customers whether times are good or bad. Alcohol consumption doesn't go down because the economy is in the dumps; it's just bought in brown paper bags in liquor stores instead of from overpriced bottle service at Las Vegas nightclubs. Until recently, even gambling was thought to be relatively recession-proof. That may still be true in Asia, but Las Vegas will tell you something different.

So why should we be looking at these stocks now? Some of them were beaten down especially hard during the market downturn, with even beer and liquor stocks tumbling during 2008. But the past year has seen many of these stocks roar back as confidence returned and drinkers began trading up again. I think the trend will only continue as the economy recovers. Here are four sin stocks worth keeping an eye on:

Company

Industry

1-Year Stock Performance

Las Vegas Sands (NYSE: LVS  )

Gaming

98.4%

Boston Beer Co. (NYSE: SAM  )

Beer

77.9%

Brown-Forman (NYSE: BF-B  )

Liquor

21.4%

Rick's Cabaret (Nasdaq: RICK  )

Gentlemen's Clubs

(29.0%)

The dog of the group, Rick's Cabaret, may be a vast underperformer over the past year, but it's the top performer year-to-date with a 31.2% bounce. An ill-timed acquisition and a rough economy hurt performance, but with a more "conservative" game plan going forward the turnaround appears to be here.

Jack Daniel's and Southern Comfort are keeping Brown-Forman investors happy, but the most impressive stock of any adult-beverage company is Motley Fool Stock Advisor pick Boston Beer Co. While bigger beer makers are fighting over light beer sales, brands like Samuel Adams are leading the craft brew revolution. That leaves shareholders to enjoy a cold one while watching their stock rise to new heights.

And what would a portfolio of sin stocks be without a bet on a casino or two. Las Vegas Sands has been on a tear, but after a recent pullback this stock may be ripe for the picking. Growth will continue to pick up with Marina Bay Sands in Singapore now fully online. While Melco Crown (Nasdaq: MPEL  ) may be a value play in the sector, the upside for Las Vegas Sands is much higher.

Keep track of your favorite sin stocks by adding them to your free, personalized watchlist.

More on sin stocks:

Fool contributor Travis Hoium owns shares of Melco Crown. You can follow Travis on Twitter at @FlushDrawFool, check out his personal stock holdings or follow his CAPS picks at TMFFlushDraw.

Boston Beer is a Motley Fool Stock Advisor recommendation. Melco Crown Entertainment is a Motley Fool Global Gains pick. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On March 22, 2011, at 5:40 PM, JF125780 wrote:

    Excellent article Travis.

    LVS will be a great investment. If the insiders would quit taking profits off the top and let the profits build up. then watch it roll.

    Wynn started a dividend and look what it did to their price.

    Danny Kowkabany

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