With such an awful year due to the disruption of the novel coronavirus, it’s hard to extract much positivity. However, with the holiday season upon us, there is at least one major opportunity to bring some joy to this otherwise terrible time. According to tradition, the seven heavenly virtues are faith, hope, charity, fortitude, justice, temperance, prudence, qualities that you may see on display this quarter. But that’s a different story. Today, we’re talking sin stocks.
On the opposite end of the spectrum, the kind that leads to perdition, are the following vices: pride, greed, wrath, envy, lust, gluttony, and sloth. While most of us strive to be good people and to leave behind a legacy of optimism, the reality is that the “dirty” stuff sells. And with consistent market profitability a huge question mark for investors, they may want to consider going low to get high.
Fortunately, sin stocks offer tremendous upside, especially because of the health and economic threats associated with the coronavirus. First, the pandemic has been a terribly stressful time for all of us. As reported by CNBC, the “number of adults experiencing depression has tripled in the United States since the coronavirus outbreak began, according to a JAMA Network study, with more than one in four adults reporting symptoms of depression.”
Second, the Covid-19 crisis has devastated the labor market. To be fair, weekly jobless claims have recently slipped to fresh lows since the pandemic uprooted the economy. However, as the Wall Street Journal points out, the number of jobless individuals remains elevated at a very high level. You figure that somewhere down the line, the government must control the crisis; otherwise, we could see long-term devastation. Cynically, though, this narrative benefits sin stocks.
Let’s face it – very few people want to face this crisis 24/7 sober or in their normal state of mind. That’s not to say that Americans are a bunch of drunkards. We all need a stress release. But individually, we have myriad ways of releasing that stress. Therefore, I like these seven deadly sin stocks to buy before the year is over.
- Service Corporation International (NYSE:SCI)
- Royal Gold (NASDAQ:RGLD)
- Smith & Wesson Brands (NASDAQ:SWBI)
- Carvana (NYSE:CVNA)
- RCI Hospitality (NASDAQ:RICK)
- FAT Brands (NASDAQ:FAT)
- Canopy Growth (NYSE:CGC)
Finally, a quick note to everyone reading this: the following list of companies are not necessarily sinful in the moral sense. In other words, don’t take the vice description too seriously; it’s all in good fun. But there’s nothing funny about their profitability potential. Without any more delay, let’s dive into our sin stocks to buy.
Sin Stocks to Buy (Pride): Service Corporation International (SCI)
I hate even bringing this up because of its macabre and horrendously cynical context. However, if you want to talk about the seven deadly sin stocks to buy, Service Corporation International takes the cake. As you probably know, there’s an old Christian teaching that states pride comes before the fall. In this case, pride is pretending that you know better than epidemiologists and centuries of common-sense practices.
Unfortunately, the political environment (and an unhealthy dose of editorial content from Fox News) has contributed to a full spectrum of conspiracy theories. From the novel coronavirus being deliberately and artificially manufactured by a Chinese bioweapons laboratory to the Centers for Disease Control and Prevention falsifying Covid-19 deaths, millions suddenly felt they knew better. And you can see where I’m going with this regarding SCI stock.
You see, Service Corporation is in the final services industry. Tragically, pride from the White House down to individual conspiracy theorists prevented many Americans from simply abiding by reasonable mitigation protocols. Now, with the crisis out of hand, you might as well buy SCI stock. Some folks just have to learn the hard way. Frustratingly with Covid-19, innocent people must often pay for others’ selfishness.
Greed: Royal Gold (RGLD)
As you know, the holiday season is a time for giving, especially to those less fortunate than us. However, it may not hurt to be a little greedy with your investment portfolio. To that end, sin stocks offer some relevant opportunities, particularly in the precious metals market. While there are many options to pick from, I’m going to go with Royal Gold.
First, Royal Gold is one of the biggest companies in the precious metals space. Further, the company operates on a royalty and streaming business model rather than through mining and exploration. In my opinion, this approach is better for conservative investors as it provides a measure of price predictability. Otherwise, direct mining companies must produce, and that production volume could be impacted by multiple variables. That’s not to say that RGLD isn’t without risks, but some variables are taken off the table.
Second, I see gold moving significantly higher in the years ahead. Primarily, the damage down to our economy suggests that the Federal Reserve must adopt a dovish monetary policy. That’s going to be inflationary for the dollar, which is net positive for RGLD stock. Plus, with so much uncertainty, Royal Gold seems like a no-brainer.
Wrath: Smith & Wesson Brands (SWBI)
While 2020 will principally go down as the year of the coronavirus, it can also be considered as the year of wrath. From stigmatization to racism to police brutality, not to mention the contentious and sometimes violent electoral cycle, we’ve seen many Americans at their worst. To that end, it’s no surprise that Joe Biden is now President-elect. Still, if you’re looking for viable sin stocks, don’t ignore Smith & Wesson Brands.
First, we’ve witnessed a record surge in gun sales and that’s probably not going to go away. For perhaps the first time in U.S. history, every demographic has a clear motivation to arm up. Unfortunately, these negative motivations still persist. Primarily, law enforcement has been overwhelmed because of the summer of protests. Also, the negative light cast on police officers for the actions of a small minority have made the job treacherous.
In other words, government and community protection may not be available. Yes, it’s a terribly cynical argument for SWBI stock, but it works.
Second, both Biden and running mate Kamala Harris have a vested interest in imposing strict gun control. Just the thought of Democrats in office should be enough to drive up firearms sales. Therefore, you may want to consider getting SWBI stock before the wave.
Envy: Carvana (CVNA)
Envy is a peculiar emotion, particularly among men. For instance, one of my neighbors got a Porsche 911 Turbo, an everyday supercar. Perhaps out of jealously, another neighbor got … a Chevrolet Camaro. Honestly, I wouldn’t care if the Camaro was much faster than the Porsche. Ten times out of ten, I’d go with the German artistry on wheels.
But here’s the takeaway: envy is still a powerful emotion despite the broader lessons we should be learning from this crisis. That means envy-related sin stocks are viable, which brings me to Carvana and CVNA stock.
Right now, there’s no better way to purchase a new ride than to go with Carvana (or similar online platform). You can test drive the car for seven days and if it’s not to your liking, you can return it. Moreover, without the dealership environment, you can enjoy maximum social distancing. That way, you can show off to your neighbors without paying the ultimate price.
More importantly, used car sales should continue rising. In part, this is because the coronavirus has turned off many people from public transportation. As well, the disruption to the auto industry means that there are fewer new cars available. So, CNVA stock isn’t just about profiting from the vice play.
Lust: RCI Hospitality (RICK)
Well, this is an easy one. Among sin stocks to buy, RCI Hospitality is a true vice. Here, the word “hospitality” is the ultimate euphemism as the company specializes in establishments that gentlemen (and some ladies) attend. Frankly, I don’t want to say anymore because I don’t want to offend the internet algorithms. However, if you have no qualms about this “service,” you might want to check out RICK stock.
For starters, intimacy sells. As CNBC detailed during the down years following the Great Recession, one sector did very well: the “hospitality” industry which I referenced above. It’s loosely related to one of the oldest professions, so it has a track record going for it. In addition, the market is resilient.
To be fair, the coronavirus is a damper because unlike the recession, we’re not just talking about an economic crisis. However, RICK stock has performed very well in anticipation of a return to normal. Further, it’s not guaranteed (though it may be likely) that we’ll see lockdowns again. If we’re forced to hunker down like earlier this year, I’m not sure how the economy can bounce back.
Because of the variability involved, this is one of the riskier sin stocks. Ultimately, though, pent-up demand makes this an enticing idea.
Gluttony: FAT Brands (FAT)
When you’re talking about sin stocks related to gluttony, FAT Brands really sells itself. Specializing in junk food, the company’s flagship brand is Fatburger. It’s been a while since I’ve been to one but the first time I was introduced to it, I quickly realized that the name was truly fitting. Have a regular dosing of these bad boys and you’ll eventually end up requiring the services of Service Corporation before your time.
However, it’s fair to point out that FAT stock has a definite coronavirus catalyst. As you know, we’ve all suffered from stress related to this crisis. Perhaps we may not know anyone who got infected or we may still have our jobs. But with cases soaring to absurd levels, we should not take our good fortune for granted. In this context, comfort food provides stress release, which cynically bolsters FAT Brands.
As well, the social seclusion and sedentary lifestyle that people have suddenly incurred has been terrible for our mental health. Many of us just need some relief. And that often translates into high consumption of fast food. It’s negative thinking, I know, but it can possibly work out for FAT stock.
Sloth: Canopy Growth (CGC)
Although the productivity of remote work has been debated vigorously, some companies are finding their productivity rates have declined. I suppose that it depends on what the primary business is. However, I generally agree with the argument that work-from-home is more a euphemism than a descriptor. Frankly, I believe most workers are sitting at home smoking a joint.
Yeah, I have a pessimistic view of the overall American work ethic, but let’s be real – one of the reasons why companies put those motivational posters about going the extra mile is because so few travel it. And that brings me to Canopy Growth. While CGC stock and the rest of the cannabis industry have suffered from disappointing setbacks, this exciting market probably won’t be denied indefinitely.
Mainly, I’m looking at cannabis and cannabis-infused products as stress relief acting as potential catalysts. According to the Washington Post, the disruption of the pandemic to our daily schedules has caused what some health experts have termed “coronasomnia.” Theoretically, botanical products can help mitigate this and other conditions.
Finally, it doesn’t hurt that Biden won the presidency. Although we’re still a bit off from full legalization, at least for Canopy stakeholders, we’re moving in the right direction.
On the date of publication, Josh Enomoto held a long position in gold.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.