Psssst... Tempted by 'Sin Stocks'?

Like many investors, I had to stop looking at my investment statements for a few months last year. The only part of my portfolio that didn't take a pretty big hit was the part in cash. My dream of riding a motorcycle around the world in retirement started to fade and was replaced by a nightmare vision of riding the bus to work every day at age 85.

When I finally got up enough nerve to examine whether I needed to move a few things or just grit my teeth and weather the bad spell, it was hard to resist selling off the investments that were drowning in red ink for ones that weren't. And particularly tempting (pun intended) possible acquisitions were the ones that never seem to take a dive, regardless of economic climate: the ones we call "sin" stocks. Read on for a few examples:
Booze

Sales of beer, wine and hard liquor always continue during a downturn and, if a downturn lasts long enough, may even increase. Many (not all wineries) are private, but there are plenty of breweries distilleries that have gone public and sell stocks. With the sale of Seagram assets to PepsiCo, Diageo, and Pernod Ricard, and the sale of Labatts to Anheuser-Busch, we may have lost two ways to invest Canadian, but there's still Molson, I thought cheerfully.

Tobacco

Smoking has become almost completely socially unacceptable in North America, and the number of places you can legally smoke are being shrunk by new legislation almost daily. Yet people throughout the rest of the world are still cheerfully filling their lungs with tar and nicotine, and smoking may never achieve the same stigma as it has here. If it does, it may not for years to come, so if you can stomach the concept of making money from coffin nails, there's plenty of profit still to be made.

Sex

While we can't exactly invest in the sex trade, you don't have to look very far to see money being made from the promise of it. The biggest growth in pornography has been on the Internet, where most of the adult content providers are not publicly traded. But companies such as Private Media Group that have focused on video on demand are doing very well, thank you. Even the sagging fortunes of Playboy have been prevented from a complete nose-dive by video on demand sales. And cell-phone based porn is growing leaps and bounds: a white paper titled Monetising Adult Content on the Mobile (December 2008) estimated that the global mobile adult content market would rise from $2.2 billion U.S. in 2008 to $4.9 billion U.S. by 2013.

Gambling

This one's a bit like shooting fish in a barrel and, after tobacco, probably the most egregious. Yet gambling is big business, and not just the casinos in places like Vegas, the original Sin City, where there are casino operators with market capitalizations in the multibillion-dollar range. Companies such as Pinnacle Entertainment and Las Vegas Sands are growing huge, developing more resorts with casinos where people can give them all their money.

I think I'm going to draw the line at buying some Molson stocks. Since I drink beer, it would be hypocritical to turn my nose up at brewery profits.

But you can do as you like. I won't tell.

Or you could resist and shuttle on over to read about ethical investing -- it's here to stay.