Last week Wall Street pulled out a strong performance. This came after a tough correction that finally took the S&P 500 down into recession territory. Friday ended in a giant win for the bulls, so their job this week is to simply maintain the momentum. Today we are sharing three of the best sin stocks to buy for the second half of 2022. The list will not be complete because there are many more worthy companies with similar outcomes.
The equities have been under selling pressure for weeks. This usually goes through relief rallies, even in bearish markets. So if this week the bulls are able to hold the momentum, they can rally another 6%. This would open the door for finding upside opportunities in many sectors, especially controversial ones.
Sin stocks are almost never boring, so they would make for an exciting bet on the market rebound. These are momentum stocks because they are also susceptible to headlines. While I am optimistic on the overall stock market, I am aware of the current macroeconomic risks. The GDP later this week is likely to spook investors. But in the end, this too shall pass and the upside opportunities will become clearer.
Meanwhile, investors would do well exercising caution. It would be smarter to deploy risks in small batches. Going all in with blind trust is a potential recipe for losses. The fear of the Federal Reserve is too great to ignore and this week Fed Chair Powell will speak again. His words were the main reason equities collapsed. He vowed to break demand down so to offset the shortage, all in the name of inflation controls.
|VICE||AdvisorShares Vice ETF||$26.04|
Altria (NYSE:MO) stock sliced through its November support too easily this month. While this is concerning, it didn’t do all of that on its own. The whole market was also tumbling, which compounded its company-specific headlines. In 2018 Altria paid big money for the vaping company Juul. And that investment has been disastrous from a headline perspective. But experts think that the downfall of the value in Juul could be a good thing for MO stock. While the investment in the vaping company fizzled, it could soon be free to pursue other venues into it.
There are also two other reasons to want to own MO stock this year. The first is the dividend, which is now a whopping 8.29%. That would go a long way toward offsetting inflation for U.S. investors. Also there is technical support in MO stock chart. This last crash brought it into a strong pivotal zone that dates back to 2014. The bulls will want to defend it hard, so MO should stabilize soon. The rebound rally off support like this could be slow and steady, especially from the new resistance above.
I struggled deciding between Penn National (NASDAQ:PENN) and DraftKings (NASDAQ:DKNG). On the one hand, PENN offers the more stable proposition with its superior financial metrics. On the other hand, DKNG stock has more binary potential. It’s more of a momentum stock and could offer sporadic explosive growth.
DKNG has collapsed almost 90% from its 2021 highs, but in all fairness, those were unrealistic levels. Now it has fallen back into and bounce off its 2019 base. The bulls can start anew with their excitement over it. But for that they also need the help of the indices in general. So, the opportunity in DKNG stock is now as least as good as the market. And it being a momentum stock, it’s likely to outshine the benchmarks.
Its current fundamental metrics are not great, nor are they a selling point. Last year, they lost more than they brought in revenues. And they burned almost half a billion in cash from operations. But management has a reputation of building good alliances for the future. So for now, it’s not that important to focus on profitability. Therefore, investors must consider this stock a speculative bet on the future success of its management.
AdvisorShares Vice ETF (VICE)
Even the best of sin stocks are almost always susceptible to headline risks. One way to avoid this is to place a blanket bet on the whole lot. The AdvisorShares Vice ETF (NYSEARCA:VICE) would do the job in this case. It contains a long list of good sin stocks, but none are heavyweights in it. As such, the occasional bad headline in any won’t necessarily hurt the VICE ETF.
The idea of owning one ticker is to participate in the upside of its collective industries. The exchange-traded fund lists sin stocks that derive at least 50% of their income from the right sectors. This includes tobacco, alcohol and gambling. There are even food and beverage companies among them. ETF’s inherit their fundamentals from their constituents, so there is no need to delve into that now. It offers a small dividend of 0.6%, so that’s not a selling point. I can get that from almost any bank account in the U.S.
Technically, VICE has support below, mainly from its pandemic crash levels. Last week it bounced well off the summer of 2020 base. While there is no guarantee that it’s a concrete floor, it is an area of interest. The bulls are likely to defend it vigorously, especially if the indices are stabilizing. The upside target could then extend to $30 per share in the next 30 days.
On the date of publication, Nicolas Chahine did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.