The Vice Index is a fund of sin stocks. It’s like a basket of badness! They primarily hold tobacco, alcohol, gambling, and defense (which we call “conflict sin stocks” here at the Sin Stock Report).
You can learn more about the Vice Index (VICEX) at their website ViceFund.com. As they list on their site, sin stocks are ideal for a few key reasons:
- Consistent demand regardless of the economy
- Global demand
- Potentially high profit margins
- Barriers to entry
Since its inception, VICEX has returned 8.88%, above the S&P’s 6.22%. (See the fund’s PDF fact sheet for more information). Their top ten holdings (as of June 2012) include:
- Altria Group (MO)
- Lorillard (LO)
- Wynn Resorts (WYNN)
- Diageo (DEO)
- Reynolds American (RAI)
- British American (BTI)
- Philip Morris International (PM)
- Galaxy Entertainment (GXYEF)
- United Technologies (UTX)
- Raytheon (RTN)
… these represent ten of their 39 holdings. Don’t worry if you don’t recognize all of these companies. I’ll look more closely at them here.
The fund’s mandate is to hold at least 80% in sin stocks. I like that ratio!
Although an argument could be made that the fund is not sufficiently diversified, what I like about the fund is that it isn’t stuck on sin stocks for sin stocks’ sake. They go to the fundamentals and consider wide moats and potential for cash flow as reasons to invest. They hold financial performance as a way to measure a stock’s potential rather than just throwing money at any company that profits from sin.
Investors might also be attracted to VICEX for another reason: Compared to the prices of individual sin stocks, they get exposure to a basket of managed stocks at a much lower cost: At the time of this writing, some sin stocks are trading the $50 to $90 range while the VICEX is still quite affordable for the average investor at about $20.
That makes VICEX cheap and easy!