Home » sin stocks » Sin Stock Due Diligence: What if the Sin Becomes Less Popular?

Sin StocksSmart investors do their due diligence before trading… And those who are investing in sin stocks need to ask additional, specific questions about the company and the industry and the sin they are investing in. This post is part of a periodic series on the due diligence questions that investors need to ask.

“Attitudes could change about this particular sin stock while I hold it. So, what will happen if this particular ‘sin’ becomes less popular?”

Here are a few examples of how decreased popularity could impact the stock:

  • You need to determine whether the popular has decreased or whether the stated popularity has decreased. Prohibition is an excellent example of this situation: The national values (the “stated” popularity) were anti-alcohol but the actual popularity barely wavered and perhaps even increased because of the taboo nature of the product.
  • Is the decrease in popularity only in one country where the product is sold or is it worldwide? A change in a small market might not have as big of an impact as a change in a large market.
  • Decreases in popularity might mean cheaper products and services, which could lead to increased sales (because of increased supply). Even though profit margins per sale might be lower, more people might buy the unpopular product because of its new price-point availability.
  • Decreases in popularity might ease social tensions, which can be highly fickle. When that social focus is turned elsewhere, popularity might increase again.
  • Reduced popularity might not mean the total demise of the company. Some stocks have other forms of revenue. Gambling stocks often have hotel and entertainment revenue; conflict stocks like private military companies might earn money from providing security and logistics.
  • Reduced popularity of one particular product might not mean reduced popularity of other products. If “hard liquor” becomes unpopular, will it impact beer or wine? Those alternative alcoholic products might not be impacted.

DISCLAIMER

Nothing on this site is a recommendation because, hey, I can't read your mind and I don't know what you have in your portfolio, and I'm not a licensed financial advisor. So never EVER trade without doing your due diligence. If you want more information about this fascinating topic, please check out the Sin Stocks Disclaimer page which basically says the same thing but more emphatically.