Smart investors do their due diligence first. And when it comes to investing in sin stocks, there are some specific questions you need to ask on top of the regular set of due diligence questions. This blog post is part of a series on questions you should ask when you are investing in sin stocks.
“Attitudes could change about this sin stock while I hold it. So, what will happen if this particular ‘sin’ becomes more popular?”
Here are a few examples about how increased popularity could impact the stock:
- Wider acceptance of the “sin” might mean more potential customers, increasing revenue and profits, which can have a positive impact on stock prices.
- Wider acceptance of the “sin” might mean a more aggressive focus on the company and its products and services, potentially uncovering hidden problems or resulting in increased litigation… risking a decline in stock prices.
- Wider acceptance of the “sin” might put pressure on the supply chain, and the company could struggle to catch up to demand.
- There might be more competition, including a more innovative competitor or a cheaper alternative, attracting customers away from the stock you’ve invested in.
- Increased competition means more companies competing for potentially fewer raw materials from suppliers. This could have a negative impact on profit margins, which could have a negative impact on stock prices.
There could be other results, as well, but these are a few of the potential results if the particular sin becomes more popular.