7 Most Profitable Sin Stocks of 2014: Part I

April 21, 2014
Karen Canella

Companies that cater to our vices do quite well, as do investors who put their money on human nature and the difficulties of breaking bad habits.

This article is published with permission from InvestmentU.com.

Depending on your beliefs, committing one of the 7 deadly sins—greed, gluttony, lust, envy, sloth, wrath, and pride—may land you in the deep, dark throes of hell. The modern-day vices most likely to be the impetus for such sins are alcohol, drugs, cigarettes, gambling, overspending, and crime.

As bad as that all sounds, companies that cater to those behaviors do quite well, as do investors who put their money on human nature and the difficulties of breaking bad habits.

Say and think what you want about tobacco, gaming, and alcohol, but these 3 industries comprise the majority of Vice Investor (VICEX), a mutual fund that’s up 140% over 5 years and 40% over one year. It has outperformed the S&P 500 for 3 consecutive years.

If the first 4 months of 2014 are indicative of the next 8, you can make that 4 consecutive years that VICEX will triumph over the large cap index.

Here are 7 stocks—love ’em or hate ’em—that may have a place in your portfolio.

1. Anheuser-Busch InBev (NYSE: BUD)

Give these 2 statistics a few minutes to absorb into your bloodstream: 18% of all beer consumed in the United States is Bud Light; and Anheuser-Busch holds about a 46% share of the domestic market by volume. That’s despite the increasing popularity of all the imports and craft beers on today’s menus.

Plenty of that consumption of Anheuser-Bush beverages occurs at some of the largest sporting events in the world, partly because the company coughs up millions on advertising. Since 2009, the company has spent more than $450 million on Super Bowl marketing, and it’s reportedly pitching in $40 million per year to Major League Baseball to serve as its official sponsor through 2018.

As the biggest world brewer of beer, Anheuser-Bush saw full-year 2013 revenue grow to $43.2 billion, up 3.3% from 2012. While beer volume dropped 2% in the US, management expects sales to strengthen in Mexico and Brazil, boosted by the 2014 FIFA World Cup.

The company finished out 2013 with a bang by buying craft beer maker Blue Point, reacquiring South Korea’s Oriental Brewing, and trying to figure out a way to bring the rest of the Modelo Group under its wing. Anheuser-Busch is also making further inroads into China. Already with a 13% market share there, its purchase of Siping Ginsber, a mid-sized Chinese brewer for $650 million, was just approved by the Commerce Ministry.

The stock is up 6% in just the past month.

2. GW Pharmaceuticals (Nasdaq: GWPH)

UK-based GW Pharmaceuticals is developing cannabinoid medications, primarily for multiple sclerosis and cancer. The company has assembled a large in-house team with extensive experience in developing cannabinoids—medicines containing controlled substances—as well as plant-based prescription pharmaceutical products.

Its lead product, Sativex, is now approved or recommended for approval in 25 minor countries, such as Norway, Israel, and Austria. Sales of the drug grew 36% in 2013 primarily due to use in Germany and Italy.

The drug treats symptoms in patients with severe spasms from multiple sclerosis who have not responded adequately to other medication. GW has now entered into 5 separate licensing agreements for Sativex with Bayer HealthCare in the UK and Canada; Almirall in Europe and Mexico; Otsuka Pharmaceutical Co. Ltd. in the US; Novartis in the Middle East, Africa, and Asia; and Neopharm in Israel.

Although revenue grew in 2013, the company expects a profit loss in 2014. However, GW showed $58.4 million in cash to close out the year. The company has one of the largest market caps in the marijuana industry at $675 million. It trades at $3.66 per share.

This stock is not for the faint of heart: It has fallen 35% in one month, yet is up 19% year-to-date and 437% over a year.

3. Vapor Corp. (OTC: VPCO)

Clearly, electronic cigarettes are not just a fad or passing phase. The industry has doubled to $3 million over the past 2 years, and it is estimated that it could grow 40% year-over-year for the next decade. While Big Tobacco is vying for its share of revenue, one company is a pure play on e-cigs.

Vapor Corp’s products can be found in more than 60,000 retail stores in the US and Canada today, with Family Dollar as the latest store to start selling the company’s KRAVE KING brand of disposable e-cigs.

VPCO reported a record-making fourth quarter 2013 in revenues, up 56% to $7 million and 22% for the full year to $26 million. Taking into consideration the growth of the industry and Vapor’s competitive edge, analysts say revenue could triple to $75 million by 2015.

While the stock has been struggling thus far in 2014, down 27%, it is up nearly 60% over 6 months and 175% over a year.

Stay tuned later this week for Part 2 of our 7 Deadly Sin Stocks.

The information contained in this article should not be construed as investment advice or as a solicitation to buy or sell any stock. Nothing published by Physician’s Money Digest should be considered personalized investment advice. Physician’s Money Digest, its writers and editors, and Intellisphere LLC and its employees are not responsible for errors and/or omissions.