Vice stocks are a corner of the market where many investors — and particularly professionals — are afraid to venture. But this reluctance by many investors to embrace vice stocks is precisely what makes them such profitable investments.
Because professional investors like to avoid being associated with merchants of death and peddlers of peccadillo, these companies tend to trade at discounts to the broader market and often pay substantial dividends.
Some areas of the vice world — in particular, tobacco and firearms — have moats around their businesses that mafia dons and drug lords would envy. Government regulation and a hostile legal regime make it almost impossible for new company to set up shop in these businesses. The compliance costs would prevent them from ever getting off the ground … and the first lawsuit would bury them.
Today, we’re going to take a look at five high-profile vice stocks and evaluate their investment merits: