Do You Want To Invest In America's Most Profitable Industry?

Mar. 29, 2018 12:54 AM ETVICE
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  • Looking for an alternative to tech stocks?
  • It’s a largely forgotten industry except among institutional investors.
  • It’s an old industry but is all about technology and innovation.

By Dan Ahrens, chief operating officer of AdvisorShares and portfolio manager of the AdvisorShares Vice ETF (Ticker: ACT)

This should be an easy question. But it’s rather complicated. In recent years, the equity markets have been on a terrific bull run – particularly in the U.S. It’s been widely publicized that the current market is dominated by just a smaller number of technology-related names that now make up a huge percentage of most stock market averages. Some of these tech stocks related to social media aren’t profitable. Others have just recently turned profitable after years with high flying stock prices while they were still unprofitable. Many online retailers that are finally showing good profits, have much of their profit due to advertising sales. The profits they make through goods and services derive from extremely large volumes with thin profit margins per sale.

So – what is the world’s most profitable industry? Tobacco. It’s largely a forgotten industry – except among institutional investors that understand its profits and performance. Many individual investors assume it must be a poor investment with declines in smoking, known health risks, high taxes, and constant legislative pressures. The opposite is true. Total revenues for U.S. tobacco companies reached $117 billion in 2016, up from less than $80 billion in 2001. At the same time, tobacco companies have consolidated through mergers and cut costs. Fewer and fewer people are smoking, but tobacco revenues have soared through years of steady price increases. With a large portion of cigarette sales going to taxes, it's easy for tobacco companies to tack on extra profit margin for themselves. A pack of cigarettes costs very little to produce.

There are many sources and metrics for company or industry data including profitability. Some of the most complete and useful information can be found at

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AdvisorShares is a leading provider of actively managed exchanged-traded funds (ETFs), offering a diversified and transparent suite of core and alternative strategies. AdvisorShares provides educational support to help financial advisors and investors understand the benefits of actively managed ETFs and their underlying investment strategies.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: To the extent that this content includes references to securities, those references do not constitute an offer or solicitation to buy, sell or hold such security. AdvisorShares is a sponsor of actively managed exchange-traded funds (ETFs) and holds positions in all of its ETFs. This document should not be considered investment advice and the information contain within should not be relied upon in assessing whether or not to invest in any products mentioned. Investment in securities carries a high degree of risk which may result in investors losing all of their invested capital. Please keep in mind that a company’s past financial performance, including the performance of its share price, does notguarantee future results. To learn more about the risks with actively managed ETFs visit our website .

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