We think of sin stocks as being investments in companies that sell taboo products or services in highly-regulated markets. These companies sell products and services that are often considered “indulgent” and “frivolous” even though consumers will tell you that they are a necessity.
This is true for cigarettes and guns and booze… but the definition also fits for cell phones too, doesn’t it? They sell into highly regulated markets; their products are indeed indulgent and frivolous at times (do you really need to upgrade?; consumers believe them to be a necessity; and their products are even taboo at times (I don’t want to be the guy whose phone rings in the movie theater!)
So although Apple (AAPL) and Blackberry (formerly RIMM, now BBRY) aren’t technically sin stocks, let’s see which one is more of a sin stock.
Apple: This popular stock produces some of the most beloved consumer electronic devices on the planet. Apple struggled for many years to find the right key to unlock their customers’ wallets but when they finally did, it skyrocketed them to become the biggest company in the known universe. The company’s clever marketing, magnetic founder (now deceased), user-friendly products, and insanely loyal user-base have combined into a perfect storm of profitability.
BlackBerry: This company has almost the opposite story. They started strong and quickly locked in as the name in mobile connectivity. But a series of almost continuous blunders, missteps, and bad press has decimated the company and its once golden reputation. The company is trying to claw its way back with a recent rebranding and the introduction of the Z10 and Q10… but it has a long way to go to even protect its current marketshare.
One company is golden, the other is gutted. But which one is more of a sin stock?
Apple has come under scrutiny for its tightly controlled and somewhat restrictive corporate policies, and it has earned some heat (but not as much as expected) because of its Chinese factories (which are allegedly of the “sweatshop” category).
Blackberry, when it was Research In Motion, backdated stock options and faced a litany of patent infringement lawsuits.
Surprisingly, all of this negative news hasn’t impacted the companies even though both activities arguably qualify them for “sin stock” status. There are many other factors that are driving these companies’ stock prices up and down but labor and financial sins aren’t one of them!