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One of the more fascinating — and perhaps ironic — facets of Wall Street is the ability to profit off some of life’s most notorious and long-standing vices, notes Bernie Schaeffer, a leading technical and sentiment-based analyst, senior editor of Schaeffer’s Investment Research and a contributor to MoneyShow.com.
The category of ‘sin stocks’ includes stocks related to businesses and industries commonly associated with ‘sins’ like drinking, gambling, and smoking marijuana.
We spoke with Tommy Manusco of B.A.D. Investments, the company that launched the BAD ETF (BAD), earlier this year and he shared his general 2022 outlook on the sin-centric exchange-traded fund with us:
Our initial indicators suggest a positive outlook for the market this year. Narrowing in on a few sectors, we believe casinos may be in a good position to have a strong year and are set to benefit in the reopening narrative once the Omicron variant gets under control. Furthermore, the expansion of legalized gambling is something we expect to continue as more states look at the additional tax revenue that could be generated given the high price of government stimulus and spending that has occurred throughout the pandemic. The same could be said for the cannabis industry as more states look at legalization. Overall, it is hard not to be optimistic given the immense amount of cash that is still in the system and the “America Coming Back/Reopening” case is still strong as America goes back to work, and we wouldn’t bet against a working America.
There are several reasons to consider investing in sin-related stocks. First, there is a low correlation between the performance of sin stocks and the overall stock market, which makes them useful for diversification purposes. Second, the demand for “sin” products is recession-proof. People will drink beer or gamble on poker when times are good. Third, some investors believe that sin stocks offer more income potential than other investments, such as bonds and utilities.
Along with the benefits of investing in sin stocks also come some risk. For example, alcohol stocks, gambling stocks, and cannabis stocks can be heavily regulated by government agencies at the federal and state levels. This may limit the sin businesses’ ability to operate freely or introduce new products without first getting approval from government officials.
Here are the nine sin stocks (alcohol stocks, cannabis stocks, gambling stocks, sports betting stocks, etc.) to keep on your radar:
MGM: More Than a Casino Stock
You could say that MGM Resorts International (MGM) is a global leader in the entertainment industry, but that would be putting it lightly. With its headquarter in Las Vegas, MGM Resorts owns and operates hotels and casinos across the U.S., including the famed Bellagio and MGM Grand in Las Vegas and 50% of CityCenter in Las Vegas with Infinity World Development Corp.
In addition to being a significant player in the hospitality industry, MGM Resorts also owns several restaurants, entertainment venues, golf courses, and non-gaming hotels. The company employs more than 64,000 workers who serve more than 37 million guests each year.
To say that MGM Resorts has its hands full would be an understatement. But the company’s reach doesn’t stop there. It also owns several media properties, including a stake in the Epix premium cable network, held jointly with Viacom and Lions Gate Entertainment
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; This Is Vegas; a social gaming platform launched with Zynga; and Beau Rivage Resort & Casino and Gold Strike Tunica in Mississippi. It’s an understatement to say that MGM Resorts has its hands full.
Boston Beer Stock Spreads Across the Nation
Boston Beer Company Inc. (SAM) is a beer company most notably recognized by the Samuel Adams lager. The company was founded in 1984 and has since grown to be the leader in the craft beer industry, with over 70 different beers in its portfolio. Besides their flagship beer, the company’s other notable brands are Angry Orchard Cider, Twisted Tea, Traveler Beer Co., and Coney Island Hard Soda.
The company currently distributes to all 50 states and 26 countries worldwide. The company also brews through third-party breweries that contract brew for Boston Beer but do not own the brewing operations. As of December 31, 2015, Boston Beer operated 15 breweries and 13 brewery locations across 13 states and England.
Boston Beer’s sales come from its Samuel Adams brand at about 60%. The remaining 40% is split between over 30 other brands.
Keep an Eye On This Cannabis Trailblazer
The legal cannabis industry has been growing at an exponential ratio. So it’s no surprise that marijuana stocks have become so popular. One of the biggest and most popular cannabis stocks is Canopy Growth Corporation (CGC).
Canopy Growth Corporation is based in Ontario, Canada. They are the most significant cannabis company globally, with a market cap of over $9B. The company was founded by Bruce Linton and Chuck Rifici in 2014. In 2016, Constellation
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Brand
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s invested $245M in Canopy Growth Corporation for a 9.9% equity stake. After this investment, many investors started seeing Canopy Growth Corporation as a good investment opportunity.
Canopy Growth Corporation operates worldwide and has facilities in 7 countries across five continents. This makes them one of the most global cannabis companies in the world. The company also produces a wide range of products, including dried cannabis, oils and concentrates, soft gel capsules, and hemp.
Another Casino Stock to Watch
Wynn Resorts
WYNN
, Limited (WYNN) owns and operates Wynn Las Vegas and Encore, two luxury hotels and casino resorts. The company also owns and operates Wynn Macau and Encore at Wynn Macau in the People’s Republic of China (the PRC or China) and is constructing Wynn Palace on Cotai in the PRC. The company’s mission is to be the preeminent developer and operator of destination casino resorts.
The company has developed a portfolio of brands that include Wynn, Encore, Wynn Plaza, and Wynn Las Vegas. Its resorts combine accommodations with amenities, including fine dining outlets, casual dining services, bars, nightclubs, lounges, and shows; numerous retail offerings; golf courses; numerous spas and salons; recreational facilities; meeting space; convention space, ballrooms, and showrooms.
As of December 31, 2015, the company operated two luxury hotel and casino resorts: Wynn Las Vegas (Wynn Las Vegas), a luxury hotel and destination casino resort located on the Las Vegas Strip, including approximately 111,000 square feet of casino space.
The Barstool Effect on Penn National Gaming
Operating facilities by Penn National Gaming, Inc. (PENN) feature approximately 32,500 gaming machines, 850 table games, and 6,700 hotel rooms. And for as childish as the site is, you can’t deny the Barstool Sports effect.
As of March 31, 2020, Penn National held a 35% equity interest in the owner of Hollywood Casino at Charles Town Races (Charles Town), a 500-acre thoroughbred racetrack and gaming facility located in Charles Town (Jefferson County), West Virginia that features 2,700 slot machines and 100 table games as well as a 298-room hotel.
Penn National is also entitled to receive 36% of the profits generated by the operator of Hollywood Casino at Kansas Speedway (Kansas Speedway), located near Kansas City (Wyandotte County), Kansas, which features 2,900 slot machines, 86 table games, as well as a 227-room hotel.
Aurora Cannabis Stock Carving its Own Space
Aurora Cannabis Inc. (ACB) is a cannabis company that is run and operated by people who are passionate about the product and dedicated to shaping the future of the cannabis industry as it continues to evolve. Aurora stock is a publicly traded company on the TSX and NASDAQ
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stock exchanges.
With over 1400 employees worldwide, Aurora is growing and producing high-quality medical cannabis and selling medical and adult-use cannabis products to tens of thousands of customers. As one of the largest cannabis producers in the world, Aurora operates facilities in Canada, Europe, South America, Africa, and Australia.
Aurora has been a significant player in the Canadian cannabis market since its legalization for recreational use in October 2018. The company operates a large manufacturing facility in Edmonton, Alberta, Canada, called Aurora Sky, producing 100,000 kilograms per year of high-quality cannabis products.
Aurora has also expanded into the United States by acquiring several companies, such as Larssen Greenhouses and Anandia Laboratories Inc., both leaders researching and developing cannabis products like oils and edibles.
Everyone Loves Games
The lottery-centric company is headquartered in London, with principal offices in Rome, Providence, Las Vegas, and Rhode Island. In addition, International Game Technology PLC (IGY) has offices in 50 countries and regions, including Argentina, China, India, Japan, South Africa, Spain, and Uruguay. It is listed on the New York Stock Exchange and a constituent of the FTSE 250 Index.
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manufactures a full range of lottery systems, including draw-based games, instant tickets (scratchcards), and server-based games for lotteries worldwide. Its systems are used by state lotteries in Italy, the United Kingdom, and the U.S., among others. The company has more than 12,000 employees located in over 100 countries on six continents.
Your Favorite Drink is Probably from Constellation
Constellation Brands, Inc. Class A (STZ) is known for its diverse portfolio of beer, wine, and spirits companies. The company’s portfolio includes more than 100 brands sold in more than 100 countries.
In the last decade, Constellation Brands has transformed itself from a North American beer company into one of the world’s leading wine and spirits companies by aggressively seeking innovative, consumer-valued opportunities to enrich its product offerings.
Constellation Brands is known for its diverse portfolio of beer, wine, and spirits companies. The company is the third-largest producer of wine in the U.S., having acquired such brands as Robert Mondavi, Clos du Bois, Kim Crawford, and Meiomi. Constellation also produces and markets beers, including Corona Extra, Modelo Especial, Pacifico, and Svedka Vodka.
Constellation Brands stock has rallied more than 30% year-to-date, but some traders are betting on more upside ahead. Data from the major options exchanges shows that traders bought to open more than 8,000 July 230 calls in just one day earlier this week. This represents a new annual high for STZ calls at the time, but it was also one of the ten most prominent single-day call buys in any stock so far in 2018.
One Last Vegas Stock to Watch
Bally’s Corp. (BALY) is a well-recognized and established brand of casinos and hotels, and it has a strong market position in Las Vegas. The casino company was founded in 1968 as Bally Manufacturing and currently owns eight properties across the United States, many of which are located on the famous Las Vegas Strip.
Bally’s has been struck by the coronavirus pandemic, as all of its properties have been closed since mid-March due to state-mandated shutdowns. This resulted in a $1.2 billion impairment charge that led to a $1.7 billion loss for the second quarter. It also burned through more than $450 million in cash.
Bally’s is planning to re-open its two Atlantic City properties next month with new safety measures for customers, but there is no word about when its Las Vegas properties might re-open.
The company has a large cash cushion to weather continued closures, but this will only be enough if it can continue to tap credit markets or get additional support from shareholders to make debt payments over the long term.
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