Sin stocks are often considered to be relatively "recession-proof." It is no accident that vice stocks do well in all economic climates. People party, smoke and gamble in good times and bad; they just do it for different reasons. One theory for the higher returns to vice stocks is they are more profitable and less wasteful with investment than the average corporation.
Another popular explanation for the observed abnormal returns of sin stocks is that they are systematically underpriced because so many investors shun them. This enables investors who are willing to invest in sin stocks, going against social norms, to earn a reputation risk premium.
Traders can take advantage of this and invest in sin stocks like cannabis companies to protect their portfolios during difficult economic times.
Sin Stocks And Expected Returns
Investing in Sin Stocks
Josh Kincaid, Capital Markets Analyst & host of your cannabis business podcast.
Episode 666 of The Talking Hedge discusses Sin Stocks via Larry Swedroe's Seeking Alpha article:
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Josh is not an investment adviser. The Talking Hedge is long gold and silver. Listeners should always speak to their personal financial advisers.
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