Sinful Stocks: Withstanding Market Volatility

Few stocks can stay consistent over a long period of time.

Economic recessions regularly cause crashes in market prices, and can damage an investor's venture.

However, sinful stocks are often able to withstand this test – due to the fact that the consumer is addicted to them and will continue to invest in them, no matter the state of the economy. 

Smith and Wesson is a firearms manufacturer in the United States.

Along with Altria, a tobacco corporation, they lead the way in sinful stocks.

The founder of Longroad Asset Management, Paul Coughlin, has benefited immensely from this strategy which he attributes to strong consumer loyalty in these areas.

For Altria,  the economic climate has little effect on their sales due to the nature of their business.

People are addicted to their products, and they will buy them regardless of how much money is in their pocket – as is the case with many sinful stocks.

Their partial immunity to economic troubles makes Altria a solid stock to invest in.

With ethical investment on the rise across the world, and people shying away from stocks like Smith and Wesson or Altria, an artificial devaluation is created at their market prices.

This can pave the way for big profits when it comes to selling.

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America’s casual approach to firearms regulations is good news for investors.

Following the massacre in Orlando at the Pulse nightclub, shares in arms producer Smith & Wesson went up 13% in June alone.

Stocks in other firearms manufacturers, Sturm Ruger, and Vista Outdoors, are respectively up 5% and 8% in 2016.

This is a common theme – following a shooting there is an increased demand in arms manufacturers, and it often lasts for around one quarter.

With the expansion of open-carry laws across the United States, stocks in arms manufacturers are likely to continue their growth for the foreseeable future.

The rhetoric that “Guns mean that people can protect themselves” carries significant strength in the States.

The more guns there are in the country, the more guns are likely to be bought – leading to an exponential growth in sales and stock prices.

This is an encouraging trend for the long-term success of the stock.

With membership in pro-gun groups increasing after every major shooting, it is likely that gun sales will continue to grow.

Pink Pistols, a pro-gun LGBT group’s membership increased massively in the aftermath of the Orlando atrocities.

The forthcoming presidential election, between Clinton and Trump, would be unlikely to have any adverse impact on firearms stocks.

Donald Trump is, like all Republicans, a very pro-gun candidate, and promises open-carry in every state.

Clinton, on the other hand, claims to be for more gun regulations.

However – her donor list tells a different story, as she earns a significant amount of money from arms manufacturers.

There’d likely be little gun regulation if Clinton became president either.

Top arms manufacturer stocks:

• Smith & Wesson (SWHC)
• Visa Outdoors (VSTO)
• Sturm Ruger (RGR)

Despite the growth in the E-Cigarette industry and a decline in cigarette usage, Altria stocks have continued to grow. 

The secret to this is Altria’s ability to influence regulators, allowing them to outperform the competition for the past thirty years.

A recently proposed law would require the E-Cigarette industry to prove their products are safer than standard cigarettes, and they must also provide evidence that they help smokers quit.

This would dramatically increase the amount of time it takes to produce an E-Cigarette product – therefore reducing the detrimental impact on the cigarette industry.

However, Altria has created their brand of E-Cigarette – the MarkTen, and it has performed well.

By producing both addictive cigarettes, and devices designed to stop people using cigarettes, Altria has ensured that they can profit of both sides of the industry.

Similar to cigarettes, E-Cigarettes can stand the test of economic uncertainty.

Despite apparently being the healthy alternative to smoking, they too are addictive, and people will happily buy them regardless of how much money they have in their pocket.

Top tobacco stocks:

• Altria (MO)
• Reynolds (RAI)
• Philip Morris (PM)

Alcohol is one of few drugs without extensive regulation.

And, whether right or wrong, this gives way to large beverage corporations being able to take advantage of this.

Addictions are an essential part of sinful, or vice, stocks.

These stocks can stay consistent regardless of the economy, which makes them a sound holding for investors.

With Trump having little interest in alcohol regulation, and Clinton having them as a major donor, there is little chance of legislation curbing the consumer’s interest in alcohol.

Partner this with its addictive nature, and a consistent economically resilient stock is created.

Alcohol consumption is also on the rise across the world.

This could be attributed to multiple differing, and often contrasting theories – the rising financial inequality and the unhappiness that comes with it, or the growing middle-class and the financial stability that comes with that.

This could also be put down to something a lot more simple – the tax cuts put on big corporations across the globe, allowing them to sell their products to the consumer for considerably cheaper.

What makes alcohol different from cigarettes is that there is no genuine alternative to it, or way of weaning addicts off the drug.

Alcohol-free options do not give users the feeling they desire, and therefore are unable to reduce the amount of alcohol consumed by the general public.

History also shows that a complete ban on the drug results in worse outcomes than it being legal.

In turn, this has created one of the most consistent sinful stocks available – free from any crippling legislation or alternatives coming up on the market.

Top alcohol stocks:

• Constellation Brands (STZ)
• Molson Coors (TAP)
• Diageo (DEO)

With the economic impact of Brexit having its effect on global markets and the value of the pound, it could be an intelligent decision to invest in sinful stocks.