| Tired of ethical investing?
Profit from vice instead
March 20, 2004
If you'd like to invest more cash in the stock
market but you hardly have enough to pay for
your sex, booze, weapons, tobacco, drugs and
gambling as it is, now you can have the best
of both worlds: Stocking up on Sin: How to Crush
the Market with Vice-based Investing teaches
readers to exploit their moral depravity for
financial gain.
Author Caroline Waxler advises people to forget
dreary socially responsible investing and profit
from their nasty habits instead.
The New York-based financial writer provides
guidance on building a defensive portfolio of
sin stocks that she believes will hold up in
good times and bad. Her sample Sindex names
69 stocks that represent vice, avarice and social
irresponsibility.
Ms. Waxler says her basket of vice stocks outperformed
the Standard & Poor's 500-stock index by
42 per cent for the five years to Dec. 31.
Not only is vice investing more fun, she argues,
it's financially sound: The sin stocks have
little correlation to the overall market, and
the more the economy tanks, the more people
need their alcohol, tobacco and pornography.
The book, published by John Wiley & Sons
Inc., is due on bookstore shelves later this
month.
Sex stocks recommended by Ms. Waxler include,
for example, preppy clothing merchant Abercrombie
& Fitch Co., "because basically what
they're selling is sex."
The ultimate sex kitten in sheep's clothing
is Limited Brands Inc. -- the Ohio-based retail
holding company that owns lingerie retailer
Victoria's Secret. The company is brilliant
at creating brand recognition with its lingerie
fashion show, she says, and both men and women
are attracted to its high-end glamour.
For more of a sex pure-play, Ms. Waxler advises
investors to buy shares in condom makers. She
recommends Church & Dwight Co. Inc., which
holds a 50-per-cent interest in Trojan.
New Frontier Media Inc. and Private Media Group
Inc. are adult entertainment companies that
provide titillation via the Internet and various
media.
Ms. Waxler says Hilton Hotels Corp. is a great
sex stock because it offers the combination
of profits from in-room entertainment and Paris
Hilton.
As for drugs, the big three, in Ms. Waxler's
opinion, are Viagra, Cialis and Levitra. The
new wave of erectile dysfunction drugs will
likely all do well, she adds.
Pfizer Inc. is the powerhouse with Viagra,
she says, but with the best general pipeline
in the industry, Cialis-developer Eli Lilly
and Co. has the most long-term investment potential.
GlaxoSmithKline PLC is part of a joint venture
that produces Levitra.
Shares in beer makers are often a good investment,
advises Ms. Waxler.
"What's the first thing someone does when
he or she gets laid off -- they go and get a
drink."
One of her top picks in that category is Anheuser-Busch
Cos. Inc. The beer producer has introduced a
low-carbohydrate brew that appeals to the cult-like
followers of low-carb diets such as the Atkins.
She also points to Diageo PLC, the world's
largest spirits company, and Constellation Brands
Inc., which produces wines in the United States,
Europe and Australia.
There's no arguing that what tobacco companies
produce is addictive and harmful and can be
fatal, Ms. Waxler says. But nobody is forcing
anyone else to smoke, she says. What one person
may consider dangerous is a panacea to someone
else.
And while lawsuits against the tobacco industry
abound, she notes that the landscape is much
different overseas. Tobacco investments are
worth considering, she says, because they have
what every product should have: customer loyalty
and a recurring stream of revenue.
Among the tobacco stocks Ms. Waxler recommends
are Altria Group Inc. and British American Tobacco
PLC.
Gambling is a multibillion-dollar industry,
Ms. Waxler notes, and no matter what the economy
is doing, people are betting that their own
personal economy will be doing better. She points
to Las Vegas and the rising popularity of riverboat
casinos in the mid-western United States.
Stocks on her list from this group include
Argosy Gaming, Alliance Gaming Corp. and MGM
Mirage.
Investing in the defence and weapons sector
should be considered a long-term strategy, Ms.
Waxler says. While defence isn't a typical vice
like smoking is, many ethical funds won't touch
the industry, she notes.
Ms. Waxler points out that defence spending
in the United States is climbing and some analysts
believe the industry will shortly begin a several-year
period of out-performance compared with the
broader market.
Defence stocks that Ms. Waxler believes will
benefit include L-3 Communications Holdings
Inc., Northrop Grumman Corp. and General Dynamics
Corp.
Ms. Waxler says any investor building a portfolio
of vice should have a healthy mix of industries,
along with growth and value stocks. They should
also diversify by country and market capitalization,
she suggests.
And Ms. Waxler's advice for those who feel
guilty about unethical investing?
"Vice investing is profiting from the
moral depravity or corruption of others, their
moral faults -- it's not participating in the
act."
The most important part of vice investing is
to have fun, she says, and enjoy the afterglow.
source:-http://www.theglobeandmail.com
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