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Sin Stock Investing: Make 99.90% on Vice Funds With Naughty Growth

|Includes:Philip Morris International Inc. (PM)

by Alexander Green, Chief Investment Strategist
A 2010 White Paper Research Report

Though many investors have heard of socially responsible funds, too few know the value of sin stocks?

While socially responsible funds try to be environmentally and socially responsible, sin stocks look to capitalize on both the constancy of human vice and the superior performance of companies that cater to it.

And they lead to outstanding investment performance almost as surely as vice itself leads to perdition.

Take a closer look at what we mean...

The Good, the Bad and the Most Profitable...

If you were given the choice between investing in the environmentally and socially responsible Calvert Conservative Allocation Fund (MUTF: CCLAX) or its polar opposite, the Oxford Club's Seven Deadly Sins Portfolio, which invests primarily in tobacco, alcohol, defense and gambling - which would you choose?

I'll give you a hint. Your profits would have been much bigger if your conscience weren't your guide.

The Calvert Fund has delivered smaller returns since March 2009, only gaining 16.39%. The Seven Deadly Sins Portfolio has delivered a much larger positive performance over that same period of time, gaining 99.90%.

Admittedly, this was a very favorable time to be invested, but this performance is no aberration...

Sin stocks also outperform their more morally conscious brethren during traditionally tough market periods. Merrill Lynch recently examined the performance of alcohol, tobacco and casino stocks in all recessions since 1970 and found that while the S&P 500 fell 1.5% on average, vice stocks rose an average 11%.

Sin Stock Investing & The Phillip Morris Company

Lets not forget that Phillip Morris Company (NYSE: PM) has been one of the best performing stocks on the NYSE. From 1972 to 2001, during one 30-year stretch, the tobacco giant averaged a gain of 17.8% per year.

Demand for tobacco is trending higher in emerging markets, compared to declines in developed markets. Philip Morris books 60% of sales in these markets already. And it continues to find new above-average growth opportunities in places like India, Bangladesh and Vietnam.

Not to mention, the company owns seven of the leading 15 international brands, including the hands down leader, Marlboro. So it's a shoe-in to win the majority of the market share in these new markets.

Such strong brand recognition also conveys another big advantage. It allows the company to charge premium prices. And it does.

In the last year, Continue Reading Report...

Disclosure: No position

Stocks: PM