Sin stocks are those which belong to publicly traded companies that involve in the activities people think to be unethical or immoral. They are the stocks found in sectors that make money from exploiting human weakness and frailties.
The Detail Definition of Sin Stocks
The example of sin stocks companies is tobacco, gambling, and alcohol industries. Other than those industries, sin stock industries can also mean regional and societal expectations. Thus, these sectors with this type of stock can vary across the globe.
For instance, in some parts of this world, brewing has been their popular tradition. Then, in that area, alcohol stocks are not the sin stock.
Besides, the political leaning can also become the factor a sector becomes this stock. This stock is the opposite of socially responsible investing and ethical investing that seeks to invest in sectors bringing benefits for society.
Since this classification is highly reliance on investors’ individual feelings, thus it is hard to have a clear classification of sin stocks. Some people may say that if a company has a history of human rights violations, then it owns this type of stock
Yet, that depends on where your moral value stands on.
The Benefits of Investing in Sin Stocks
Many of these stock provides sound investments. These sectors, naturally, have a steady stream of consumers. That comes from the inelastic demand for their product, thus these companies are more recession-proof.
Other than those, there are also social and regulatory risks that minimize the number of competitors of these businesses. The lesser the competitor, the more solid the fat margins and profit for the business.
Various research has also found that these stocks are usually undervalued for their negative image. Thus, analysts and institutional investors usually avoid them. For those investors willing to take the plunge this can be a super attractive investment. One more important note, there are some biggest sin stocks own great long-term record generating shareholder value.